Moguls’ Feud Puts Berlusconi’s Italian Media Empire in Play

(Bloomberg) -- Two of Europe’s most prominent media tycoons are battling for control of Mediaset SpA, with French billionaire Vincent Bollore building a stake in the broadcaster founded decades ago by his close friend, former Italian Prime Minister Silvio Berlusconi.

Mediaset surged again in Milan on Wednesday, adding to its biggest gain in two decades as both sides fueled the rise. Bollore’s Vivendi SA declared a 12 percent stake Tuesday, saying it could raise that to as much as 20 percent. Berlusconi’s holding company Fininvest SpA countered, saying late in the day that it bought about 3.5 percent more of Mediaset to bring its voting stake to about 40 percent.

The companies have been squabbling for months, in court and in public statements, over a botched venture that would have given Vivendi control of Mediaset’s Premium pay-TV channel and each company a stake in the other. Premium was at the center of a plan by Bollore to form a media alliance in southern Europe that could counter online players like Netflix Inc. and Amazon.com Inc.

“When the guards are distracted, the predator hits,” said Carlo Alberto Carnevale Maffe, a professor of business strategy at Milan’s Bocconi University. “Vivendi’s move might be interpreted also as negotiating tactic to increase its bargaining power in the controversy with Fininvest over Mediaset Premium.”

The Mediaset Premium deal, valued at about 880 million euros ($936 million) when it was announced in April, collapsed in July after Paris-based Vivendi tried to alter the agreement, lowering the value of the unit. The dispute went to court, with executives of both companies hardening their tone. The two moguls, who have been friends for decades, failed to bridge their differences.

This week, Bollore flexed his muscles, saying Mediaset was too important to leave to the courts. It’s similar to the squeeze he’s put on previous targets, including Havas SA and Gameloft SE.

“We see Vivendi’s ultimate interest as controlling Mediaset in the same way as it (and Vincent Bollore) has done with a number of other assets, i.e. acquire a large minority stake and influence the strategic direction of the company,” Liberum said in a note to clients. “Mediaset is now likely to be seen as a potential bid target.”

Mediaset extended Tuesday’s gains and advanced as much as 8.8 percent to 3.90 euros in Milan, its highest level since June 23, giving the company a market value of 4.6 billion euros. That followed a 32 percent advance Tuesday, the steepest jump since the company was listed on the stock exchange in 1996. Vivendi fell 0.7 percent to 18.43 euros Wednesday in Paris.

Vivendi and other media companies need to compete on digital platforms and on pipelines owned by telecom companies, said Maffe, the Bocconi University professor. He said Vivendi, which owns 24 percent of carrier Telecom Italia SpA, already possesses critical, complementary assets. Vivendi has also held talks to sell its Canal Plus pay-TV unit or form an alliance with French telecom carrier Orange SA, people familiar with the matter have said.

The decision to scrap the purchase of Mediaset Premium was “part of a specific pattern revealed with Tuesday’s move,” Berlusconi’s Fininvest said in a statement. “To create the conditions to artificially bring down the value of Mediaset and launch a discount purchase that looks like a real hostile takeover.”

Mediaset couldn’t be notified prior to the purchases for legal reasons, a spokesman for the French company said. While the move was not solicited, it is not hostile, he said.

To contact the reporters on this story: Daniele Lepido in Milan at dlepido1@bloomberg.net, Alexandre Boksenbaum-Granier in Paris at aboksenbaumg@bloomberg.net, Tommaso Ebhardt in Milan at tebhardt@bloomberg.net. To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Ville Heiskanen