Mediaset shares jump on hopes of Vivendi settlement

By Giancarlo Navach and Gwénaëlle Barzic

MILAN/PARIS (Reuters) - Hopes for a settlement in a legal dispute between Mediaset (MS.MI) and France's Vivendi (VIV.PA) over a soured pay-TV deal drove shares in the Italian broadcaster as much as 7.5 percent higher on Friday.

The two companies have been at loggerheads since last year after Vivendi backtracked on a deal to buy Mediaset Premium, the pay-TV business of a group controlled by the family of former Italian prime minister Silvio Berlusconi.

Sources close to the matter have said the two sides are in talks over a possible deal, with Vivendi hoping to reach an agreement before a Dec. 19 court hearing in Milan on the case.

Mediaset is seeking up to 3 billion euros (£2.6 billion) in damages from Vivendi.

On Friday, two sources close to the matter told Reuters reaching an accord was only a matter of days. However, a Mediaset executive said that while lawyers were working on a possible solution, no deal was imminent.

Italian daily Il Messaggero said on Friday that Vivendi would pay Mediaset cash compensation of around 700 million euros to settle the dispute.

It said a possible deal would also involve a recently created joint venture between phone group Telecom Italia (TIM) (TLIT.MI) and Vivendi's pay-TV canal Plus. Vivendi is TIM's top investor.

According to the paper, the joint venture would pay Mediaset 600 million euros over six years for content ranging from video to sport, thus guaranteeing the Premium unit steady revenues.

Hopes a settlement could be reached pushed Mediaset shares up 4.8 percent to 3.224 euros by 1455 GMT, after they earlier hit a 6-1/2 weeks high of 3.308 euros.

One of the sources said the deal being discussed was "more complex" than what was reported by the Italian press and that the figures mentioned were too high. The source declined to give more details.

A source close to TIM said the group was in negotiations with Mediaset about current and future agreements on content, but added the talks had nothing to do with the litigation between Mediaset and Vivendi.

Mediaset's Chief Financial Officer Marco Giordani dampened expectations of an imminent accord.

"There is nothing yet and the negotiations are pretty lukewarm," Giordani told Reuters. "The lawyers are talking but nothing has arrived at board level yet."

He said he did not know whether a deal could be struck by the Dec. 19 hearing.

Vivendi walked out of the deal to buy Premium in July last year, calling its business plan unrealistic. The rift with Mediaset deepened when the French group built up a 29 percent stake in the broadcaster last December to become the second largest shareholder after Berlusconi's family.

The French company has repeatedly said the move was not hostile but a sign of long-term interest.

(Additional reporting by Stefano Rebaudo in MILAN and Sophie Sassard in LONDON, writing by Agnieszka Flak)