The pair will also team on production and TV streaming services, in a major push that will see them take on the likes of European pay TV giant Sky. They will also provide a greater challenge to Netflix and Amazon Prime Instant Video by creating a ‘global over-the-top (OTT) television delivery platform’.
The deal sees the firms exchange a 3.5% equity stake in each other’s businesses and Vivendi take over Mediaset Premium. While Mediaset will receive a 0.54% stake in Vivendi directly, RTI, its subsidiary that controls Mediaset Premium, will receive 2.96%. The share exchange includes a three-year lock-in provision.
Telefónica, which owns an 11% stake in Mediaset Premium, is expected to sell on its stake to Vivendi, respecting a clause in its agreement with Mediaset.
The deal will also include a ‘stability pact’ between Vivendi and Mediaset holding company Fininvest under which Vivendi will not buy any shares in Mediaset for the first year after the closing date and will not take its stake in Mediaset above a threshold of 5% in the second and third year.
Crucially, Mediaset Premium, which is distributed via DTT and IPTV platforms has local rights to the Champions League football tournament, which has involved a heavy financial burden for the company. The unit, which has two million subscribers, lost €83.8 million last year. The relatively weak position of the Premium unit has fuelled speculation that Vivendi chairman Vincent Bolloré’s longer-term goal is to acquire all of Mediaset.
Vivendi already has the Canal+ and CanalSat pay TV services in France and the Watchever OTT service in Germany. It also owns the rapidly expanding TV and movie production and distribution business StudioCanal. It also launched a new premium mobile content service last week.
The company said the deal gives it 13 million subs in Europe and “confirms Vivendi’s intention to build strong positions in Southern Europe, a market that shares a similar Latin culture and roots”.
Vivendi’s existing investments in Italy include the media group’s 24.9% stake in Telecom Italia.
According to Mediaset, the agreement will see pair develop content production “on an international scale” via a new international structure with content distributed via the pair’s TV networks in Italy, France and Spain.
The OTT platforms of the two groups in France, Spain and Germany will “converge into a single project” to create a platform that will distribute dedicated original productions as well as existing content. Mediaset said the OTT platform is also intended for expansion into countries where the pair are not currently present.
“The deal between Vivendi and Mediaset is a potential game changer,” said Paolo Pescatore, of CCS Insight. “Vivendi is therefore now positioning itself as a content powerhouse in Europe. Sky’s move to consolidate its position in Europe has arguably triggered this move as the media industry continues to see a wave of corporate activity.
“Similarly, pay TV providers have come under significant competitive pressure with the arrival of OTT providers like Netflix and telcos adding TV/video services as part of a multiplay offer.”
The deal needs rubber-stamping by regulators and will close in the next few months, Vivendi said.
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