Market Insight

Vivendi ups stake in Mediaset to 12% despite continuing dispute

December 14, 2016  | Subscribers Only

Tim Westcott Tim Westcott Director, Research and Analysis, Programming

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Vivendi has built up a stake of 12% in Mediaset and says it wants to increase its shareholding in the Italian company to 20% before Christmas. The two companies are already in dispute over their agreement for Vivendi to acquire pay TV business Mediaset Premium, announced in April this year.

Under the original deal, Vivendi - parent company of Canal Plus - was to acquire 100% of Mediaset Premium, with the deal being funded though the exchange of 3.5% shareholding stakes. Part of the deal was a lock up clause preventing Vivendi from acquiring more than 5% of Mediaset shares over the next two years.

In July, Vivendi said that it wanted to amend the terms of the agreement, acquiring only a minority 20% stake in Mediaset Premium and moving to a 15% stake in Mediaset itself over three years. The rethink followed a report from consulting firm Deloitte stating that a forecast that Mediaset Premium would break even in 2018 was 'unachievable' and should be adjusted.

Consequently, Mediaset decided to bring the French group to the central court in Milan, Italy, alleging a breach of the terms of the preliminary contract signed a few months earlier. Mediaset is claiming damages of €50 million for each month of delay, starting on 25 July, in addition to the mandatory execution of the contract.

Mediaset’s share price has fallen steadily since then, reaching around €2.20 a share on 12 December. In an announcement published on Monday evening, Vivendi announced the acquisition of 3.01% of the shares in Mediaset, and increased its shareholding to 12.32% yesterday. At the opening of the market today, the value of Mediaset’s shares jumped 30%, reaching its highest value in the last 12 months.

If Vivendi is successful, it will become the second biggest investor in Mediaset after the Berlusconi family’s Fininvest. In an immediate reaction to Vivendi’s move, Fininvest has increased its participation in Mediaset to 40%.

Our analysis

Vivendi’s aggressive move is not unexpected and was, indeed, predicted by Mediaset, which said today that Vivendi's move amounted to a 'shift from an industrial agreement to a hostile takeover'. In its Q3 results presentation, Mediaset executives even blamed disappointing results for the pay TV service in the third quarter on a lack of management.

The turmoil over the summer seems to have cooled Vivendi's ambition to form a pan-European OTT platform.Vivendi's main shareholder and chairman Vincent Bolloré has a reputation for building minority stakes in companies before launching a full takeover bid. The accumulation of shares in Mediaset seems to fit with this pattern, also adopted in the past to acquire Gameloft and, indeed, Vivendi itself. It should be noted, however, that Vivendi has a 24.9% stake in incumbent telco Telecom Italia.

Mediaset has publicly declared its intention to resist to the acquisition, but recent events seem to suggest that the takeover of Mediaset by Vivendi is inevitable, despite the Berlusconi family’s determination to keep control of the company. Fearing a hostile takeover, Mediaset has not hesitated to use strong words to comment on Bolloré’s strategy, accusing the French manager of having stepped back from his original offer in August with the sole purpose of lowering the value of Mediaset shares and to target the Italian company in possibly the most aggressive way.

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