Vivendi now owns 20% of Mediaset, but next steps unclear

Vivendi is continuing its hostile bid to acquire a significant stake in Mediaset. The French media giant announced yesterday that it had now passed the 20% threshold of ownership in the Italian broadcaster.

Industry observers have been taken by surprise by the speed with which Vivendi has upped its stake in Mediaset, and the French group’s objectives remain unclear.

Fininvest’s leading position as holder of 40% of the voting rights in Mediaset means that Vivendi would have a hard time mounting a full hostile takeover of the broadcaster.

Analysts at Berenberg have suggested that Vivendi may be building its position as a bargaining tool to force Fininvest and Mediaset to come to an arrangement in relation to their long-running dispute over Vivendi’s decision to abort a deal whereby it would have taken control of pay TV unit Mediaset Premium, instead of pursuing the matter in the courts, as they are currently doing.

“It seems a possibility that Vivendi is in fact trying to scare Fininvest and Mediaset, with the intention of making them drop their lawsuits against the French group,” it said in a note released today.

Berenberg calculated that Mediaset would have paid a maximum of €850 million for its stake, based on Mediaset’s share price – much less than the €2 billion or so in damages the analysts reckon it may be liable for if the lawsuits currently being mounted go against it.

Berenberg hypothesised that Vivendi may have built its stake In Mediaset through a combination of ordinary shares and derivatives, meaning that it likely paid much less.

Mediaset and Fininvest are separately pursuing Vivendi over damages they say were inflicted on the broadcaster as a result of Vivendi pulling out of the agreement to buy the pay TV operation.

Berenberg is sceptical about the rationale for the move given by Vivendi itself – namely, that a strategic partnership between the pair still makes sense. It describes the possibility of Vivendi and Mediaset now achieving a deal as “rather unlikely” and points out that the goal of building a global OTT platform is built on shaky foundations. “We doubt Vivendi has the pockets to do what Netflix and Amazon are seeking to do, and Mediaset certainly does not,” it said.

While collaboration in content and distribution may make some sense if content can be amortised across different markets, with Vivendi providing distribution opportunities, language limitations could play a role in limiting the value of this, Berenberg said. However, one area where the pair could come to an agreement is through a possible sale of the transmission tower business of Telecom Italia, in which Vivendi is the largest shareholder, to Mediaset.

While Vivendi may now attempt to build its stake further, Berenberg argues that Vivendi will have a challenging time taking “creeping control” because “Fininvest is so much larger” than other companies where the French media group has adopted similar tactics, and “better positioned to block Vivendi’s tactics”.