Mediaset move will create ‘stronger business’ but pan-European merger unlikely

Mediaset’s creation of a new holding company and the merger of its Italian and Spanish operations is a “bold move” that will “create a stronger business that can benefit shareholders and consumers in the medium to long term”, according to analysts at investment bank Berenberg.

However, Berenberg said that it does expect ProSiebenSat.1 or “any other broadcasters” to be folded into the new holding company “anytime soon”.

Giving Mediaset a ‘buy’ recommendation, the analysts said that the combination and the creation of MediaforEurope (MFE) would deliver synergies in the area of distribution and advertising technology rather than programming, where local content is seen as crucial. MFE has set out a target of achieving cost synergies of €100-110 million by 2023.

While there “may be potential for savings in the back-end production of certain programmes” Berenberg said that “the goal here is not to feed Italians with Spanish content and vice versa, which could put at risk the market-leading positions of both players”.

Berenberg, which recently hosted ProSiebenSat.1 CEO Max Conze on an investor roadshow, noted that the latter’s CEO Max Conze “was clear that there could be synergies from collaboration/combination with non-domestic broadcasters, notably in the area of distribution and advertising technology”.

Mediaset recently acquired a 9.6% stake in the German broadcaster in a move that fuelled speculation about future collaboration or even a full merger.

For Berenberg’s analysts the creation of MFE “makes a lot of sense for shareholders of both the operating entities” even though “some will say that broadcasting is a local business and that there are limited cross-border synergies”.

Putting Mediaset’s deal in context, the analysts said that the increasing reliance of broadcasters on streaming for distribution means that cross-border synergies in this are can be realised, which was not so much the case with traditional over-the-air transmission. The analysts believe that the combination has the greatest potential in delivering a common advertising and streaming platforms, something that is more difficult to do with looser forms of collaboration.

On the programming side, Berenberg believes there could nevertheless be some synergies through common script development and the use of sets for multiple language versions of programmes, for example.

Berenberg’s analysts said that there is no sign of a merger between the new company and ProSiebenSat.1 being realised in the near future.

The bank said that ProSiebenSat.1 CEO Conze “has set out a bold strategy for how to return the group to sustainable growth” and is unlikely to “throw in the towel this early in the period of execution”.

It also noted that that MFE “would not have the financial resources to make a cash bid for a European broadcaster” and that any deal would have to a stock-based transaction, as the merger between Mediaset’s Italian and Spanish ventures will be.