Mediaset Rejects Vivendi’s Alternative Offer for TV Alliance

  • Italian broadcaster seeks to enforce deal to sell Premium unit
  • Board authorizes ‘all necessary measures’ to respect contract

Mediaset SpA rejected an alternative proposal for an alliance with Vivendi SA, as a conflict that broke out suddenly this week between the two European media companies devolved into a full-on war of words. Mediaset fell to the lowest level since November 2014.

The Mediaset board, controlled by the family of former Italian prime minister Silvio Berlusconi, said in a statement Thursday that it would seek to enforce the deal Vivendi agreed to in April, the purchase of Mediaset’s Premium pay-TV unit in a share swap valued at about 880 million euros ($974 million). Vivendi unexpectedly canceled the transaction on Tuesday, offering to negotiate a new deal with more favorable terms.

Mediaset’s board authorized “all necessary measures to ensure the respect for the original terms of the contract by Vivendi,” according to Thursday’s statement.

Vincent Bollore

Photographer: Marlene Awaad/Bloomberg

The deal’s collapse sent Mediaset shares tumbling, and set off a volley of accusations, threats and assertions. Mediaset suggested Vivendi and its chairman, Vincent Bollore, were plotting a takeover, and Vivendi insisting it only backed out of the deal because Mediaset’s financial projections for money-losing Premium had proved to be unrealistic.

Vivendi produced excerpts from a draft report dated June 2 it had commissioned from the accounting firm Deloitte that concluded Mediaset Premium’s plan, which called for the pay-TV channel to reach breakeven as soon as 2018, “appears unachievable and would need to be seriously downgraded in order to be realistic.”

Vivendi said Thursday that Mediaset’s contention -- that the French media comany’s proposed renegotiation came out of the blue -- amounted to “defamation” because the two sides have been discussing it for weeks.

Ahead of Plan?

Mediaset, for its part, broke out Premium’s quarterly results for the first time, showing shrinking losses that were actually smaller than planned in each of the past three quarters. In the second quarter, the operation lost 37.1 million euros, less than the forecast 39.8 million euro loss, the company said.

"Mediaset Premium’s net result showed clear signs of improvement during the last quarters, in line or even better than what we had budgeted," Chief Financial Officer Marco Giordani said on a conference call with analysts.

Mediaset also reported first-half results on Thursday, blaming a loss on the failed Vivendi deal. The loss of 27.8 million euros includes a one-time cash payment of 34.6 million euros related to the Premium deal, Mediaset said.

Mediaset, Italy’s largest commercial TV broadcaster, said second-quarter revenue rose 7.4 percent, citing an advertising recovery in the country. Sales of 958.6 million euros surpassed analysts’ average estimate of 853 million euros, based on data compiled by Bloomberg.

Mediaset dropped as much as 8.5 percent on Friday to 2.7 euros, compounding Tuesday’s 6.9 percent decline, to reach its lowest level since November 2014. The shares were down 7.2 percent at 2:53 p.m. in Milan, giving Mediaset a market value of 3.2 billion euros. Vivendi was down 0.6 percent in Paris trading at 17.51 euros.

Lingering Impact

The advertising upturn is expected to continue in the third quarter. However, Mediaset warned its results could be affected by delays in decisions about Mediaset Premium, and by decisions made by Vivendi that weren’t foreseen in the original budget of Mediaset Premium.

Vivendi had agreed in April to buy full control of Mediaset Premium as part of a broader alliance that involved a 3.5 percent stake swap between the two companies. On Tuesday, Vivendi backed out of that deal, proposing instead to purchase just 20 percent of the pay-TV unit, and to increase its stake in Mediaset to 15 percent in three years with a mandatory convertible bond.

The decision by Paris-based Vivendi has cost Mediaset about 1.5 billion euros, people familiar with the matter told Bloomberg News on Wednesday. While Silvio Berlusconi, 79, founded Mediaset, it is now led by his son, CEO Pier Silvio Berlusconi.

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