Why Mediaset Upped Its Stake in ProSiebenSat.1, but Ruled Out a Full Takeover

ProSiebenSat.1 CEO Max Conze - H 2018
Courtesy of ProSiebenSat.1

The Italian group recently increased its stake in the German TV giant and has called for ProSieben to join its pan-European vehicle Media for Europe.

Italian media giant Mediaset could further raise its stake in ProSiebenSat.1 to 20 percent, but has no plans to pursue a full takeover of the German TV giant, Mediaset CFO Marco Giordani said Friday.

His comments came as industry analysts have been discussing the company's pan-European dreams and strategy behind the moves.

Mediaset this week, via its Spanish unit Mediaset Espana, paid $188 million (170 million euros) for an additional 5.5 percent stake in ProSieben, raising its holding in the group to 15.1 percent. The move makes Mediaset the largest single shareholder in ProSiebenSat.1, which operates several free and pay TV channels in Germany.

Mediaset has indicated it may increase its ProSieben stake to just under 20 percent. But Giordani, speaking at a media conference in Barcelona on Friday, said the company had no plans to make a bid for all of the German group.

Giordani, however, did push for ProSiebenSat.1 to join Media for Europe (MFE), a Dutch holding company Mediaset has created into which it hopes to combine its Italian and Spanish media assets. Mediaset has pitched MFE as a vehicle for the European TV industry to achieve scale as a means of fighting off global streaming giants like Netflix and new SVODs players such as Disney+ and Apple TV+.

But French media group Vivendi, a minority shareholder in Mediaset, opposes the plan, claiming it is actually a move by the family of Italian media mogul, and former Prime Minister, Silvio Berlusconi to tighten its grip on the company. Vivendi has mounted legal challenges to the move. A hearing on the dispute is set in the Court of Milan for Nov. 22.

Francois Godard, an Italy-based analyst with research group Enders Analysis, says he is “puzzled” by Mediaset's proposals to create a pan-European broadcast group. “If it is their corporate strategy, it's not well thought out,” he says, “Mediaset has not been able to create meaningful synergies, neither in programs nor in advertising, between its TV operations in Spain and Italy, despite the markets being quite close culturally, so why would they manage to do that with the very different TV market in Germany?”

Berenberg analyst Sarah Simon sees Mediaset's investment in ProSiebenSat.1 as "largely opportunistic," driven by a low share price. “[Mediaset] think the prospects for free-to-air broadcasting in Europe is much better than the market believes, and so they think ProSieben shares are very cheap,” she says.

But Simon notes that Mediaset is also looking to "try to accelerate the path to European consolidation” by increasing its influence over ProSieben.

Mediaset's proposed strategy of pan-European cooperation is an outlier in the market, where most companies are looking for strictly national solutions to the challenge of Netflix and Co. In the U.K., free-to-air networks ITV and the BBC just launched BritBox, a streaming service that will pool their local content, along with shows from fellow Brit broadcasters Channel 4 and Channel 5. In France, national networks TF1, France Television and M6 have finally received regulatory approval to launch Salto, a local SVOD, early next year.

Even ProSieben CEO Max Conze has downplayed the idea of cross-border cooperation, preferring to focus on regional partnerships like the company's new advertising technology joint venture with German competitor RTL Group.

Speaking to Reuters at the Barcelona conference, Conze noted that a corporate merger of Mediaset and ProSieben could lead to the two companies getting “sucked into years of structural work that doesn’t really build the future,” saying he thought more progress could be made by focusing on collaboration in digital growth areas.

But even in the digital space, Godard sees little scope for cross-border cooperation.

“There's a good reason why British and French broadcasters are pulling together on the digital side, because they share an ecosystem, they share an audience and they share an advertising market,” Godard says. “They are trying to migrate their competitive advantage on live TV —where they traditionally dominate — into the digital world. But there is no pan-European audience and no pan-European advertising market. It doesn't exist.”