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Mediaset now a take-over prospect?

Media analysts at Deutsche Bank now caution that investors must consider Italy’s Mediaset as a “take-out” candidate, and – in the bank’s view – is now the leading M&A prospect in the Media sector.

Events this week, not least Vivendi completely altering the ‘agreement’ it had to acquire 100 per cent of Mediaset Premium, have now created a high degree of uncertainty. Vivendi’s new proposals (based in essence on Vivendi taking a 20 per cent share of Mediaset Group) is being discussed tomorrow, July 28, by Mediaset’s board and is expected to be rejected.

Mediaset is arguing that the agreement it had in place with Vivendi is binding. If the agreement is binding then it is difficult to see how much wriggle room Vivendi has to exit from the deal.

Laurie Davison, equity analyst at Deutsche Bank, outlines four potential and quite different scenarios:

  • Premium deal stands. Mediaset is successfully in the courts in insisting the deal was already signed and is binding
  • Vivendi proposal adopted. We believe this least likely but we explore valuation for the proposal
  • The April deal collapses and Vivendi walks away
  • The April deal collapses and Vivendi comes back

Additionally, Davison reminds investors that this is no longer a cool and calm situation. “It is hard to see resolution of the Mediaset position and VIV’s revised offer. So a period of lengthy legal dispute seems most likely. We could be stuck in legal limbo for years. Without legal compulsion to honour the April agreement, relations may now be too sour for VIV even consider returning for any further alliance if its new proposal is rejected.”

But, Davison suggests that Vivendi still want to sit around the table. “The explicit message from VIV is that they still want involvement. It even describes its revised proposal as ‘a more ambitious project, in line with the development of the television market and the strategy developed by our main competitors. It also reinforces Vivendi’s commitment to building a major strategic alliance with Mediaset and Mediaset Premium’.”

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