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LONDON (Reuters Breakingviews) - Mediaset shares may be on the up bit of a big dipper. Silvio Berlusconi's group has soared in value on hopes of a takeover by Vivendi, controlled by Vincent Bollore. The French tycoon may still unlock a breakup value higher than the current share price. Yet the lack of clarity over his objectives means shareholders' ride could get rockier.
Mediaset shareholders have had a good time free-riding on Vincent Bollore. After falling out with Berlusconi due to a botched deal to buy Mediaset's pay-TV business, Vivendi has been snapping up more than a quarter of Mediaset stock, pushing it up over 60 percent since mid-December.
Investors could yet benefit. With its current stake Vivendi cannot control Mediaset, which is 40 percent owned by Silvio Berlusconi's Fininvest. It might launch a full takeover. Alternatively, it could take control, as it did last year with Telecom Italia, and break the company up. Or Silvio Berlusconi could try to buy it out himself, probably with the help of other Italians.
Assume Mediaset can sell its stakes in listed companies Mediaset Espana and EI Towers at a 35 percent premium to their value before Vivendi stakebuilding began. The stakes would be worth 2.35 billion and 700 million euros respectively. The stake in the pay-TV business, meanwhile, was valued at about 700 million euros, according to the now-collapsed deal with Vivendi in April.
Last comes the unlisted Italian free-to-air business. Put next year's 180 million euros of EBIT, as forecast by Kepler Cheuvreux, on a 13 times multiple and it could be worth 2.3 billion. Deduct debt and add a 35 percent premium, and the equity value would be about 1.8 billion. Chalk it all up and throw in some residual assets, and Mediaset could be worth 5.7 billion euros, or 4.8 euros a share.
Yet the market is already baking in much of that value, at 4.4 euros a share. And the exit could be elusive. Berlusconi may be able to marshal opposition to a deal from Italians who want to keep the company in domestic hands. Bollore may be more interested in settling litigation with Berlusconi over the failed pay-TV deal. Or he might just slowly take control without buying out minorities, if Berlusconi retires. There are probably easier ways to make money than second-guessing billionaires.
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