Berlusconi buys stake in German TV in anti-Netflix pivot

Former Italian premier's Mediaset makes offer ProSieben couldn't refuse.

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    Mediaset's Chief Executive Pier Silvio Berlusconi called the $380m move a 'friendly acquisition' [Stefano Rellandini/Reuters]
    Mediaset's Chief Executive Pier Silvio Berlusconi called the $380m move a 'friendly acquisition' [Stefano Rellandini/Reuters]

    Italian broadcaster Mediaset SpA has bought a stake in Germany's ProSiebenSat.1 Media SE as it seeks to diversify beyond its home country and fend off growing competition from Netflix Inc.

    The 9.6% holding is worth about 340 million euros ($380 million), based on ProSieben's closing price on Tuesday. ProSieben shares gained 4.4% as of 10:36 a.m. in Frankfurt, while Mediaset fell less than 1%.

    The purchase by Mediaset, controlled by former premier Silvio Berlusconi's family, builds on the companies' existing collaboration in the European Media Alliance network and makes the Italian group ProSieben's second-largest shareholder.

    European broadcasters are trying to fight back against Netflix and Amazon.com Inc., including by gaining scale through acquisitions and streaming partnerships. Vivendi SA's Canal+ agreed to buy pay-TV operator M7 for about 1 billion euros this week to expand into seven European countries.

    Mediaset Chief Executive Officer Pier Silvio Berlusconi, the former premier's son, called the move a "friendly acquisition" to create an "increasingly international outlook," in a statement. "European media companies like us need to join forces if we are to continue to compete, or even just resist, in terms of our European cultural identity, eventual attacks by the global giants."

    Mediaset has been tackling weak profitability in a challenging Italian advertising market by striking content and distribution deals with phone company Telecom Italia SpA and Sky Ltd.'s Italian unit. Now it wants to strike a cross-border deal by July that helps the European industry compete with the U.S. tech giants.

    While the ProSieben investment sets the ball rolling towards a European tie-up, Mediaset has no plan to acquire the rest of the German company, said people familiar with the situation, who asked not to be identified discussing internal matters.

    The investment in free-to-air broadcaster ProSieben follows years of setbacks for Mediaset's efforts to cash in on its pay-TV business, after Vivendi backed out of a deal to buy the unit in 2016, triggering a legal spat between the two companies.

    Streaming technology

    There has long been industry speculation about a possible tie-up between Mediaset and ProSieben and the companies denied a newspaper report that they were in merger talks, in April. Mediaset probably bought into ProSieben to cut costs by collaborating on things like streaming technology, said Sarah Simon, an analyst at Berenberg.

    "I don't necessarily think there will be a full merger, at least not in the near term," Simon said by email. Mediaset is likely to push cost savings first, she said, "before deciding if they wanted to acquire more."

    ProSieben's CEO Max Conze is trying to shift the German broadcaster away from traditional TV and boost digital sales by replacing top staff and investing in a new streaming platform. He aims to generate half of ProSieben's revenue from digital activities within about five years, trying to reverse a share plunge which forced the broadcaster off Germany's DAX index last year.

    "We welcome Gruppo Mediaset's investment and see this as a vote of confidence in our strategy and the team," Conze said in a statement.

    SOURCE: Bloomberg