Vivendi gains upper hand in Mediaset court battle after EU ruling

By Elvira Pollina and Marine Strauss

BRUSSELS/MILAN (Reuters) - The European Union's top court ruled on Thursday that an Italian law forcing French Vivendi <VIV.PA> to forfeit a stake in Milan-based TV group Mediaset <MS.MI> violated the bloc's rules, potentially allowing a shake-up of the country's media industry.

The Court of Justice ruling strengthens Vivendi's hand in a long-running dispute, helping it regain voting rights for its full 29% stake in Mediaset, which is 44% owned by the family of Italy's former Prime Minister Silvio Berlusconi.

The ruling brought an immediate response from Mediaset which said it could now consider its own investments in the telecoms sector. Vivendi is the biggest shareholder in Telecom Italia <TLIT.MI>.

Vivendi, led by French billionaire Vincent Bollore, has been embroiled in a legal dispute with Mediaset since it withdrew from a deal to buy the Italian group's pay TV unit in 2016 and built up a stake which Mediaset considers hostile.

Vivendi's U-turn on the pay-TV sale, a deal which was widely seen as a first step to building a Southern-European media powerhouse, prompted Mediaset to seek multi-billion euro damages.

A legal case has been ongoing ever since, while attempts to clinch a wider settlement and break the stalemate have so far proved unsuccessful.

Sources said the new developments could prompt the two sides to try again to resolve their disputes.

Mediaset shares rallied up to 7% after the ruling as investors speculated over possible new M&A scenarios for the Italian broadcaster stemming from Thursday's court decision, a Milan-based trader said.

Vivendi welcomed Thursday's ruling saying it was forced to defend its interests in court while it remains committed to the Italian market.

The EU ruling is the culmination of a case dating back to 2017 and a decision by Italy's communications watchdog that Vivendi's stakes in Mediaset and former phone monopolist Telecom Italia broke rules designed to prevent a concentration of power in the telecoms and media sectors. It ordered Vivendi to reduce one of its holdings to below 10%.

Vivendi challenged the decision in an Italian court, which referred the case to the EU court.

To comply with the Italian regulator's request, Vivendi transferred two-thirds of its voting rights in Mediaset into an arm's-length trust, which has been barred from voting at the Italian group's shareholder meetings.

This year however, Vivendi has managed to block in the courts a Mediaset plan to merge its domestic and Spanish <TL5.MC> units under a Dutch holding company aimed at forging tie-ups with other European peers and taking on increasing competition from streaming services like Netflix <NFLX.O>.

Mediaset said on Thursday it was ready to assess any opportunity to invest in the Italian telecom sector, including a government sponsored plan to create a single ultrafast broadband network - something the broadcaster was prevented from doing in the past.

Italy's existing media laws grew partly out of parliamentary concerns in the 1990s over the combined political and media power of Berlusconi.

Fininvest, the Berlusconi holding company that controls Mediaset, declined to comment.

(Reporting by Elvira Pollina in Milan, Marine Strauss in Bruxelles, additional reporting by Giancarlo Navach; Editing by Keith Weir, Elaine Hardcastle and Lisa Shumaker)