Bollore turns up heat on Berlusconi over Mediaset stake

By Agnieszka Flak and Gwenaëlle Barzic

MILAN/PARIS (Reuters) - French tycoon Vincent Bollore has raised the stakes in a battle of nerves with Silvio Berlusconi's Mediaset by saying Vivendi could buy up to a fifth of the Italian broadcaster, stirring talk of a hostile takeover bid.

Vivendi, led by chairman and biggest shareholder Bollore, now owns 3 percent of Mediaset and has said it could raise that to 10-20 percent "to begin with", as part of the French media group's strategy to expand into southern Europe.

Bollore's move has deepened a feud that began in July when the French company ditched an agreement to take control of Mediaset's pay-TV unit, Premium, and give the two companies shareholdings in each other. Instead, the two groups are facing off in court, with a first hearing due in March.

A source close to the matter said a hostile takeover by Vivendi was not on the agenda "today", but the French group wanted to strengthen its position to reopen discussions with the Berlusconi family.

"Vivendi prefers to go with a soft approach for now but if there is no way to discuss, we'll have to reassess at this point," the source said.

A Vivendi spokesman declined to comment beyond reiterating the group's statement from Monday.

But the French move has rekindled market speculation about Bollore's real intentions in Italy, drawing parallels between Mediaset and Vivendi's aggressive stake-building in Telecom Italia last year, where it now owns 24 percent.

"This is just the first page of a new story," Mediobanca analysts said in a note.

"A group like Mediaset - leader in commercial TV in Italy and Spain, strong skills in content production, with a well established pay-TV business - is a corner stone for everyone willing to set up a media platform, with strong focus on southern Europe."

Mediaset's shares, under pressure since the pay-TV dispute, jumped as much as 26 percent to 3.44 euros ($3.66), climbing back to levels they stood at before Vivendi dropped the Premium deal. Vivendi shares were flat at 1120 GMT.

Mediobanca, which has an 'outperform' rating on Mediaset and a 3.96 euro target price, said uncertainty over the Premium saga and Italy's referendum pushed Mediaset to a 50 percent discount vs peers. "Given the potential speculative angle, we believe Mediaset should trade at least in line with peers."

Mediaset's controlling shareholder, Berlusconi's Fininvest holding company, accused Vivendi of trying to depress the company's share price by dropping the pay-TV deal to then launch a hostile takeover at a discount.

Bollore, who is also a key shareholder in Italian investment bank Mediobanca, has built a reputation as a corporate raider, resorting to different strategies to take control of businesses.

"This looks like the typical Bollore pattern ... acquire a small stake, then build it up and then look to influence the direction of the company," Liberum analysts said in a note.

Some bankers have suggested Vivendi may eventually seek to combine Telecom Italia and Mediaset. All parties have repeatedly denied such speculation.

Bollore's actions also coincide with a step up in the pace of consolidation in the European media sector, especially after Rupert Murdoch's $14 billion bid for British pay-TV firm Sky Plc.

Analysts expect both Vivendi and Fininvest to raise their Mediaset holdings in coming months, underpinning the share price, but said a full takeover seemed unlikely in the short term given the Berlusconi family's 34.7 percent stake.

Fininvest said it did not plan to diminish its role as top investor and would use all means to block Vivendi's move.

Mediaset still aims to pursue its legal battle against the French company, and said had hired top Italian banks Intesa Sanpaolo and UniCredit as advisers.

($1 = 0.9410 euros)

(Additional reporting by Mathieu Rosemain in Paris, Editing by Silvia Aloisi and Jane Merriman)