May 13 (Bloomberg) -- Mediaset SpA, the broadcaster controlled by former Italian Prime Minister Silvio Berlusconi, may match or exceed the $1 billion offer Telefonica SA made last week for Promotora de Informaciones SA’s pay-TV division, two people familiar with the matter said.
The Italian company, which owns a 22 percent stake in Distribuidora de Television Digital SA, or DTS, through its Spanish unit, has an option with Prisa to match the bid of any buyer, one of the people said. If Mediaset exceeded a bid by even 1 euro, it could rewrite conditions for offers, the people said, declining to be identified because the talks are private. A second option would allow Mediaset to increase its stake to 50 percent and create a joint venture with Telefonica.
“Mediaset strongly needs to expand its business in Spain, to show potential partners for its Premium pay-TV unit that it also has some good international assets outside Italy,” said Andrea Giuricin, a professor who specializes in media and telecommunications at Milan Bicocca University. “That’s why the Italian company will probably try to raise the bid.”
Telefonica’s Chief Operating Officer Jose Maria Alvarez-Pallete, attending a Madrid conference, declined to comment on Mediaset’s plans yesterday. Barbara Manrique, a spokeswoman for Prisa, had no immediate comment when contacted by e-mail. A representative of Mediaset also declined to comment on any potential offer or an increase in the stake.
Mediaset shares rose 0.6 percent to 3.77 euros at 9:10 a.m. in Milan, giving the company a market value of 4.45 billion euros. Telefonica fell 0.7 percent to 11.78 euros and Prisa shares rose 2 percent to 40.8 euro cents in Madrid.
Mediaset, which competes with Rupert Murdoch’s pay-TV provider Sky Italia, is working to generate profit consistently following economic contractions that ended last year in Italy and Spain, the two markets where it operates. Mediaset Espana owns the DTS stake and Mediaset would make the bid, the people said.
Prisa on May 8 agreed to sell 56 percent of DTS to Telefonica for 725 million euros ($1 billion). The companies have 30 days to close the details of the agreement and the deal still needs approval from antitrust officials. Mediaset may wait for the Spanish competition regulator’s reply before making its own offer, another person said.
Mediaset is scheduled to release first-quarter earnings today. It may report sales of 825.6 million euros, in line with a year earlier, according to the average of analysts’ estimates compiled by Bloomberg.
Mediaset is in talks to find an industrial partner for its pay-TV unit Premium and no binding agreements were signed, Mediaset Deputy Chairman Pier Silvio Berlusconi said at the annual general meeting on April 29. Vivendi SA’s Canal Plus and Al Jazeera are among the bidders, one of the people said.
PricewaterhouseCoopers, which advises Mediaset, wrote a due-diligence note saying that if Premium was spun off, the company would break even for the full year 2014, one the people said. Net profit of 55.1 million euros and 101.9 million euros are forecast for 2017 and 2018, respectively, one person familiar with the document said.
The Mediaset board meeting agenda scheduled for today doesn’t include DTS discussions, Mediaset’s Chairman Fedele Confalonieri told reporters.
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