PARIS – French paybox Canal Plus and the main backers of the Dutch-based pay TV group NetHold have formally agreed on plans to merge the two companies.

NetHold’s joint shareholders, the Swiss-based Richemont group and South African pay TV company MIH, signed off on the deal with Canal Plus on Tuesday. The powerhouse merger, which will see the creation of Europe’s largest pay TV operation, was first announced in September.

Under the terms of the deal, Canal Plus will take control of NetHold’s pay operations in Scandinavia, Benelux, Italy and Central Europe. NetHold’s pay TV channels in Africa, the Middle East, Greece and Cyprus go to MIH. In addition, Richemont and MIH get a 20% stake in Canal Plus. The Gallic paybox also paid NetHold’s owners $45 million.

While Canal Plus, Richemont and MIH have now agreed on the deal, the authorities in each of the countries where NetHold is present have yet to give their blessing to the merger. A Canal Plus statement this week said that the necessary greenlights are expected by March or April.

When the merger is finally authorized it will create a pay group with just over 8.5 million subscribers, under the control of Canal Plus. Apart from giving the French group a foothold in Scandinavia, the deal also opens up the Italian market for the Gallic giant.

NetHold has a 45% stake in Italian pay TV digital operator Telepiu, alongside the German Kirch Group and Silvio Berlusconi. Canal Plus execs are hoping they can strike a deal with Kirch that would give Canal Plus the majority of Telepiu in return for scaling down Canal Plus’ 37.5% stake in German pay channel Premiere.

In the short term, media analysts expect the merger to have a negative effect on Canal Plus’ results. The paybox turned a $133 million profit in 1995, but a NetHold statement in September said the company is not expected to hit operating breakeven until around 1999.

Last month, Canal Plus chairman Pierre Lescure fought off an attempt by private Gallic web TF1 to block the merger in the French courts.

TF1 and Canal Plus are partners in the pan-European sports service Eurosport. TF1 claimed that by merging with NetHold, Canal Plus was infringing on an earlier agreement not to be directly or indirectly involved in a rival to Eurosport. NetHold’s interests include several thematic sports services. TF1 asked a Paris court to either block the merger or ensure that the NetHold sports channels were excluded from the deal.

The Paris court threw out the request, which has paved the way for relations between Canal Plus and TF1 to hit an all-time low.

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