Telefonica Offers $400 Million for Mediaset’s 22% DTS Stake

Jun 18, 2014 3:49 am ET

(Updates with price details in second paragraph.)

June 18 (Bloomberg) -- Telefonica SA offered to buy Mediaset SpA’s 22 percent stake in Distribuidora de Television Digital SA for 295 million euros ($400 million) to gain full ownership of the Spanish pay-TV company.

The price may increase by 10 million euros if Telefonica completes its purchase of 56 percent of DTS from Promotora de Informaciones SA, or Prisa, and by as much as 20 million euros more depending on gains in pay-TV customers over four years, Telefonica said today in a statement. Bloomberg reported Madrid- based Telefonica’s discussions with Mediaset on June 4.

Telefonica, Spain’s biggest phone company, is betting on TV programs to bolster its shrinking domestic phone business. Fully owning DTS would give it more flexibility in tailoring offers such as Movistar Fusion TV, a package of TV, landline, mobile- phone and Internet subscriptions. Mediaset has been considering options such as increasing or selling its DTS stake, people familiar with the matter have said.

If Mediaset accepts Telefonica’s offer, it will also waive a preferential right to acquire Prisa’s stake in DTS. In compensation, Telefonica will pay Mediaset an additional 30 million euros, according to the statement.

“Telefonica’s offer is very tempting and it will be difficult for Mediaset to refuse,” Andrea Giuricin, a professor at Milan’s Bicocca University who specializes in media and telecommunications, said in a phone interview.

Mediaset needs cash to compete in Italian auctions for Serie A football TV rights against rivals including Sky Italia, part of Rupert Murdoch’s 21st Century Fox Inc., Giuricin said.

Telefonica said on June 2 that it agreed to buy a 56 percent stake in DTS from Prisa for 750 million euros to increase its holding to 78 percent. The deal requires regulatory approval.

Shares of Telefonica rose 0.6 percent to 12.56 euros at 9:47 a.m. in Madrid. Mediaset rose 2.3 percent to 3.62 euros in Milan.

--With assistance from Daniele Lepido in Milan.