Reignited Springer-ProSieben merger push faces familiar hurdles

* Merger hopes revived in much-changed media landscape

* Deal would still attract intense regulatory scrutiny

* Springer family ownership presents further complications

* ProSieben shares down 0.6 pct, Springer up 2.6 pct (Recasts, adds quotes, background, updates shares)

By Harro Ten Wolde and Klaus Lauer

FRANKFURT/BERLIN, July 7 (Reuters) - Germany's top TV broadcaster and the country's biggest newspaper publisher are again testing the waters for a potential merger that would need to negotiate the same regulatory hurdles that derailed a deal a decade ago.

Broadcaster ProSiebenSat.1 and Axel Springer have reignited talks with the aim of consolidating their push into digital media markets, sources said late on Monday.

Though the previous attempt at a tie-up was blocked by competition authorities and media watchdog KEK, which feared the combined company would have too much influence on public opinion, the ever-increasing prominence of online rivals such as Netflix (Xetra: 552484 - news) , Amazon and Google (Xetra: A0B7FY - news) presents a much-changed media landscape.

Though a deal would make more sense now as the companies look to tap in to a consumer base that increasingly use smartphones and tablet computers to get news, watch videos and listen to music, the traditional competition concerns and the view of KEK will still be in sharp focus.

And the situation is further complicated by Springer's assertion on Tuesday that majority owner Friede Springer, the company founder's widow, would not give up control. However, it stopped short of denying outright that it was in talks with ProSieben. The broadcaster, meanwhile, has been equally reticent on whether discussions have taken place.

Beyond the economic and jobs impact, any proposed deal would also be examined for its potential effects on journalism and civic debate in Germany.

"At first sight, it would look like any deal would have no chance of going through," said Ian Whittaker, an analyst with Liberium Capital in London. "I think the difference now from ten years ago can be summarised in one word: Google."

ADVERTISING POWERHOUSE

A merger between the publisher of Europe's best-selling tabloid, Bild, and the broadcaster of mass-market hits such as Germany's Next Topmodel would create a German powerhouse in advertising that could better compete with the likes of Google.

Yet KEK's latest annual report on media concentration cites a ruling by the German Constitutional Court last year as reaffirming the view that TV remains the dominant force in shaping public opinion, rejecting arguments that the time consumers spend on Internet sites alters that analysis.

Still, much has changed from a decade ago, starting with the relative size of the two companies. While Springer was once in the driver's seat of any combination, the value of ProSieben has surged to twice that of Springer.

While Springer's share price has risen by about 50 percent to a market capitalisation of 4.7 billion euros ($5.2 billion), ProSieben's value has more than tripled to 9.8 billion euros.

The groups generated combined revenue of 5.88 billion euros last year, with Springer accounting for 3 billion euros.

Responding to reports of the merger talks, Springer said in a statement on Tuesday that it is sticking with plans to change its legal structure to allow the Springer family to retain control of the group, even if the family's holdings fall below a majority from its current level around 57 percent.

"Speculation regarding a relinquishment of control is completely unfounded," the company said, though it declined to comment directly on the "substance of market speculation".

A source familiar with the matter told Reuters that merger talks were in their very early stages and any potential deal was months rather than weeks away.

INTENSE SCRUTINY

Shares (Berlin: DI6.BE - news) in Axel Springer jumped as much as 8.5 percent on Tuesday, settling back to a gain of 2.6 percent at 48.09 euros by 1435 GMT. ProSieben was down 0.6 percent at 44.17 euros.

Analysts had little doubt that a tie-up would face intense regulatory scrutiny. Kepler Cheuvreux analyst Andrea Beneventi said in a research note to clients that a combination of the two would control 23 percent of the 15 billion euro German advertising market.

"(That) almost a quarter of the advertising market (would be) in the hands of a single group clearly raises a red flag," Beneventi wrote.

Liberium's Whittaker, meanwhile, said that it is the core businesses rather than digital operations that would be of concern to competition regulators.

"One way around the competition issues would be to look at a deal that would combine the digital businesses of the two companies into a new structure," he said. "This may also address Springer's comments that the family is not willing to give up control."

A person familiar with the situation told Reuters the Springer family is unlikely ever to hand over control.

"Springer and junior partner, these two terms don't go together," the source said.

Whittaker's view was echoed by others, with one media banker saying: "Both are old-fashioned media companies with a dash of digital media. Combining them does not necessarily make them stronger in the digital area ... a merger with a company from the new media space would make much more sense.

"There is a certain logic to the deal (for international scale), but there are also a truckful of stones on the road." ($1 = 0.9069 euros) (Additional reporting by Alexander Huebner, Arno Schuetze, Maria Sheahan, Hakan Ersen and Kirsti Knolle in Frankfurt, Leila Abboud in Paris, Eric Auchard in Vienna; Editing by David Goodman)