From France comes a heavy blow for Mediaset. After a long negotiation and an agreement now reached, Vivendi backtracks on the Premium deal and aims to rise more than expected in the capital of the Biscione.
The Cologno Monzese-based group explains in a note that it received on Monday from Vincent Bolloré's group an alternative scheme of the operation: the exchange of 3,5% of the capital of Vivendi with 3,5% of Mediaset remains confirmed, but the French now offer to buy only 20% of the share capital of Mediaset Premium (compared to the 100% originally agreed) and to hold in about three years 15% of the capital of Mediaset through a convertible bond loan, while the initial agreement provided that Vivendi could only raise up to 5% of the capital in three years.
Mediaset also announces that the Board of Directors meeting on 28 July for the approval of the half-yearly report "will officially take a position on this proposal and on the very serious communication from the CEO of Vivendi”. The group, he concludes, is firmly determined to assert all of its rights in every venue. It therefore seems probable that the Biscione decides to resort to legal proceedings, undertaking a lawsuit with several zeros. Based on the calculations, the Cologno Monzese company could claim damages of between one billion and one and a half billion euros.
The letter from Vivendi, reads the note, "eludes a punctual response to an order addressed to it by Mediaset to fulfill its contractual obligations – hitherto unfulfilled – in the first place that of promptly notifying the acquisition of control of Mediaset Premium to the EU Antitrust Commission”.
Il Biscione also informs that yesterday “Vivendi's managing director verbally communicated that Vivendi does not intend to honor the stipulated contract in any case. Vivendi's communication is an absolute and non-agreed novelty for Mediaset. It represents a clear contradiction with the commitments assumed by Vivendi through the contract signed on 8 April last, concluded after long negotiations with the approval of all the competent bodies of both parties”.
For its part, Vivendi's management believes that there are “significant differences in the analysis of Mediaset Premium results” which he aimed to acquire and despite this he confirmed “his will to build a strategic alliance with Mediaset – writes the French giant in a note -. Yesterday the group made a proposal to find a new agreement in different terms and to continue the negotiations".
Immediate reflection on share on the Mediaset Stock Exchange, which was suspended at the opening due to an excessive downtrend, only to be readmitted down 14,55%, to 2,76 euros.
According to information gathered by Radiocor, the last meeting between the two companies to discuss Premium's prospects took place two weeks ago in Paris. During the appointment, Vivendi's management would have explored the potential of the pay-TV industrial plan noting the extreme difficulty of bringing pay TV to break even in the medium term and thus expressing many doubts on the possibility of restructuring the asset.
This confrontation could have been followed by an exchange of proposals and counter-proposals to modify some terms of the agreement announced last spring, but between the parties the frost has fallen.
After having suffered losses of 83 million in 2015, Premium recorded a loss of 65 million in the first quarter of 2016, but the company underlined in its documents that these are numbers in line with the budget. Vivendi's doubts, after the confirmatory due diligence on the numbers that ended in recent weeks, would therefore concern the possibility of preparing a plan that will bring Premium into balance within a reasonable time. According to Mediaset's plans, however, the break-even is scheduled for 2017.
