5 Key Questions About the Vivendi/Mediaset Faceoff Pitting Vincent Bolloré and Silvio Berlusconi

Vincent Bollore Silvio Berlusconi

In the past two days, French media conglomerate Vivendi has swiftly snapped up 20% of Italian broadcaster Mediaset in a surprise move that pits two European media tycoons and former friends against each other: renowned corporate raider Vincent Bolloré  and former Italian Prime Minister Silvio Berlusconi.

Mediaset is accusing Vivendi of preparing a hostile takeover attempt after a partnership deal between the two companies, signed last April, fell apart. The Italian broadcaster has slapped Vivendi with a 1.5 billion euro ($1.56 billion) lawsuit stemming from Vivendi’s decision to pull out of the partnership, which would have seen Bolloré’s conglom buy Mediaset’s loss-making pay-TV service.

Here are five key questions about this tussle between two European media giants:

Will Bolloré keep going, or will he stop at 20%?

On Thursday, Vivendi’s buying spree of Mediaset shares subsided. But it’s unclear whether Vivendi is stopping altogether or just pausing. “I don’t think Bolloré will stay at 20%,” says Francois Godard of Enders Analysis. He may stay put for a while, but Bolloré is not making moves to remain the minority shareholder. He wants control of Mediaset. He will use the 20% to try to get representation on the board. He may try to develop alliances with the smaller shareholders. He may buy more. He may go to 30%. “A full takeover on Mediaset seems out of reach for Vivendi at this point, since Fininvest has 40% of voting rights,” says French analyst Jean-Baptiste Sergeant at Main First. Italian brokerage firm Equita said in a note that Vivendi could keep buying, but the more likely scenario is “the start of a negotiation.” “Vivendi possibly orchestrated this aggressive push in order to intimidate Mediaset and coerce the Italian broadcaster to withdraw their lawsuit and get them back to the negotiating board,” says Sergeant.

What can Berlusconi do to stop a Bolloré takeover attempt?

Berlusconi has vowed to fight any move by Vivendi to take over the media empire he created, which is run by his son Piersilvio. The former premier also said his family, which holds 39.8% of Mediaset’s voting rights through its Fininvest holding company, was increasing its stake in the Milan-based TV group. But there are limits on how high the Berlusconi camp can go without being forced to launch a total takeover bid, and they are not flush with cash.

The newly formed Italian government is in Mediaset’s corner; it depends on Berlusconi’s Forza Italia party’s votes in the Senate. The economic development minister, Carlo Calenda, warned Wednesday that, while Italy respects free-market rules, Vivendi’s move on Mediaset “doesn’t appear to be the most appropriate way to proceed” to boost Vivendi’s presence in Italy. But what the government could do to block Bolloré is unclear. He is well-connected in Italy: His daughter Marie is on the board of powerful Milan merchant bank Mediobanca, along with Berlusconi’s daughter Marina, and he controls Italian telco Telecom Italia with a 24.9% share.“Bolloré understands the Italian system, he understands what rules apply and how to work the system,” says Godard.

What makes Mediaset so attractive to Bolloré?

Mediaset is a nice asset because they have 58% of the TV advertising market in Italy and 43% of the market in Spain. He bought 20% after the Mediaset price had dropped 30% after the partnership with Vivendi went sour. “Looking at the history of the Bolloré investments, I think he’s very familiar with an advertising-based media model,” says Godard. “I think he likes free-to-air TV; he may even prefer it to pay-TV, even though he owns Canal Plus.”

Says Sergeant: “Strategy-wise, it seems that Vincent Bolloré is using Vivendi as his investment firm to acquire stakes in companies that are struggling and becoming the majority shareholder without doing proper takeovers – as it’s done with Ubisoft in France.” Sergeant adds that there are no real synergies between Mediaset and Vivendi.

Would a convergence between Mediaset and Telecom Italia make sense?

“It’s an attractive hypothesis in theory,” says August Preta of Itmedia Consuting, “but in practice it’s very complicated for regulatory reasons and because it’s not clear how Telecom Italia could monetize [Mediaset] content within an OTT business model, which Mediaset doesn’t know well enough.” Godard says that “for Telecom Italia it’s much better to continue working with Sky and other providers.”

Could Bolloré and Berlusconi kiss and make up?

“Part of the Berlusconi family would be very happy to move into a long-term passive capitalistic position in a broader media group and have a long-term stake in Vivendi as opposed to a controlling stake in Mediaset,” says Godard. “But the main obstacle is Mediaset management at this point. The animosity between the current management team of Piersilvio Berlusconi and Vivendi makes it very difficult to believe that these teams could work together.”