Vivendi and Mediaset: this marriage is not to be performed!

In order to summarize what has happened to the agreement between two of the largest media companies in Europe, Mediaset and Vivendi, during the last months, we could take one of the most famous sentences in the history of the Italian literature: “this marriage is not to be performed, not tomorrow, nor ever!”.

The original agreement, signed in the April of last year was based on the exchange of 3,5% Vivendi’s equity of 882 million euro, with 3,5% of Mediaset’s one of 144,7 million euro, and with the entire block of shares of Mediaset Premium.

However, in the last summer, Bollorè, Vivendi’s Chairman, started not to be aligned with the agreement, saying that Mediaset has provided false business plans about Premium. Berlusconi’s family replied that Vivendi perfectly knew Mediaset’s Financial statements and started an harsh legal wrangling that is actually evolving.

The situation exploded in December, when Bollorè has managed to amass more than the 25% of the Italian media group controlled by the Berlusconi’s family, through a series of trades. The consequence was that the share price of Mediaset, listed in Milan, arrived at a value of more than 30%. The reaction of the Berlusconi side was immediate: the move by the French Media group has been declared as an “hostile takeover”, and the family’s investment vehicle, Fininvest, lodged a complaint with prosecutors in Milan over market manipulation and it added a further 5 per cent of Mediaset to take its stake to near 40 per cent.

The operation is something aligned with Bollorè personality, he is called “the shark” because in his history as a business man, he is in not new to financial moves like the one he carried out towards Mediaset. At this proposal, Fedele Confalonieri, chairman of the Italian media company, lead a strong attack to Vivendi, claiming that it is difficult to defend from the stake building by Bollorè, since French companies tend to cannibalize.

The operation did not represent just a matter of finance, but it is strongly linked with political issues. Actually, in the same moment, Italy was undergoing a deeply anxious political situation, with the change in government after the defeat of Mr. Renzi at 4th December referendum. However, the new Italian Prime Minister, Paolo Gentiloni, and above all the new Minister of Economic Development, Carlo Calenda, have strongly defended the Italian character of Mediaset. Calenda has defined the operation as opaque, declaring that: “An investor has to come to Italy explaining clearly what are its aims and objectives, Italy is not willing to accept raid “.

Certainly, this is something that Italian government had to do towards an Italian company with more than 4000 employees , but this could represent a consequence of the implicit support that Silvio Berlusconi craftily gave to the new Government lead by Gentiloni.

Once examined what has happened in the last months, it should be interesting to define what could be the future development of this affair.

Firstly, a new agreement between Mediaset and Vivendi. Mediaset has presented its new strategy that aims to scale down the pay-TV unit, making it more sustainable, in order to fill a concern raised by Vivendi. At this proposal, Mediaset’s chief executive Pier Silvio Berlusconi declared that his company is open to any proposal that creates value and makes industrial sense.

Secondly, linked with the previous possibility, Fininvest could swap its stake in its media company for a holding in Telecom Italia, in which Vivendi is a top shareholder with a 24,9 % share, in order to create a fully integrated media-telco company able both to develop contents, and to have a massive distribution channel on which broadcast.

Thirdly, Mediaset could change partner and sell Mediaset Premium to Sky. A great deal of discussions have occurred between Berlusconi and Murdoch families during recent years, and probably in the last October, time before the “hostile takeover” by Bollore took place, Silvio Berlusconi met Rupert Murdoch in New York expressly to find an agreement. In order to verify if this possibility could be real we should wait until the next bids for Champions League and Serie A broadcasting rights, when it would be clearer if Mediaset and Sky have developed an alliance against the French cannibalism.

However, the traditional media companies involved in that game, Mediaset, Vivendi and also Sky have to be careful in not to lose too much time in debating: Netflix is coming. Rather, Netflix has already come, probably now it is surpassing them.

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