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Berlusconi to Test Rules Backing Minorities in TV Bid

June 08, 2011

(Closes shares in fifth paragraph.)

June 8 (Bloomberg) -- Italian Prime Minister Silvio Berlusconi, who owns Italy’s biggest free-to-air TV network, wants to control the country’s broadcast towers. To do so, he must win over minority investors in a first test of the nation’s new takeover rules.

Berlusconi’s Mediaset SpA has until June 30 to conclude exclusive talks to combine its tower operations with Digital Multimedia Technologies SpA in return for a controlling stake in the company, known as DMT. Minority investors then will decide whether Mediaset should be exempt from buying them out too.

Italy’s stock-market regulator Consob introduced the new takeover rules in May, giving smaller investors more power and aligning the country with nations such as the U.K. Control of Telecom Italia SpA, Italy’s biggest phone company, has changed hands three times since 1999 without the buyer making a takeover offer to all shareholders.

“The new regulations mean that minority investors will decide, based on the business plan and whether the new owner can convince them it can create value,” said Arturo Albano, a Milan-based independent adviser to professional investors on matters including corporate governance. “Minority investors now can’t be bypassed.”

DMT shares fell as much as 6.7 percent, the most since May 2010, before closing up 0.8 percent to 21.30 euros in Milan. Mediaset was little changed at 3.52 euros.

“There are some concerns about the deal linked to antitrust issues, which are weighing on the shares as the deadline for the talks gets closer,” said Emanuele Vizzini, who manages more than 500 million euros ($733 million) as chief investment officer of Investitori SGR in Milan.


Under the new rules, minority shareholders must decide whether to grant an exemption to a requirement for a full takeover bid after an investor reaches a 30 percent stake. Previously, Rome-based Consob decided on the exemption issue and all shareholders would then vote on its ruling.

The regulations “bring other decision-makers to the table and there will be deals that will become more complicated,” said Roberto Bonsignore, a regulations lawyer at Cleary Gottlieb Steen & Hamilton LLP in Milan. “Whether it brings benefits to the company isn’t clear.”

Mediaset is proposing to merge its broadcast towers into DMT, valuing the new entity at about 420 million euros. Mediaset would own at least 60 percent of the business, controlling more than a third of Italy’s TV broadcasting-tower business.

Three investors, Lazard Asset Management, Permian Investment Partners and Octavian Advisors LP, which own a combined DMT stake of about 21 percent, may hold the key to the transaction. Officials for Lazard and Permian declined to comment. DMT’s biggest investor is Alessandro Falciai, a former Mediaset executive who is willing to give up control.

‘Greater Voice’

A DMT spokesman said a shareholder meeting to decide whether to grant the buyout exemption has tentatively been scheduled for October.

“The Mediaset transaction is attractive and we are always in favor of rules that give shareholders a greater voice,” Richard Hurowitz, chief executive officer of New York-based Octavian, which owns 6 percent of DMT, said in an interview. He declined to say how Octavian would vote on the exemption.

Mediaset has about 1,700 towers, structures designed to accommodate multiple tenants using technologies including broadcast television and wireless services, reaching 96 percent of Italian territory, according to its annual report.

DMT hosts signals for TV, radio and mobile phone operators on its 1,500 towers. Mediaset was DMT’s biggest client last year, accounting for about 13 percent of its sales as TV made up almost half of total revenue. Mobile phone companies including Telecom Italia, Wind Telecomunicazioni SpA and Vodafone Group Plc generated 32 percent of DMT’s revenue in the same period.

Monopoly Concern

“The deal makes sense because transmission towers are a scarce resource and will be increasingly so,” said Claudio Aspesi, an analyst at Sanford C. Bernstein in London. “Antennas are strategic for data traffic and this could turn out to be a good investment.” Controlling DMT might allow Mediaset to “substantially” raise the cost of entry for any potential competitors in the digital terrestrial business, he said.

Mediaset rivals including Telecom Italia Media SpA, the TV unit of Telecom Italia, have expressed concern about the impact of the deal on the broadcasting market. Giovanni Stella, CEO of Telecom Italia Media, a DMT client, said on a conference call with analysts in May that access to the infrastructure and pricing should be closely monitored by the industry regulator.

UniCredit SpA analyst Giovanni D’Amico said approval by the competition regulator is “among key risks” for concluding a transaction. D’Amico said the combined company could control about 40 percent of broadcasting towers in Italy.

Berlusconi, who is standing trial in Milan on allegations he paid for sex with a minor, effectively controls Italian state-owned broadcaster RAI SpA as well in his position as head of the government. RAI and Mediaset dominate the country’s free- to-air TV market, controlling about 90 percent of viewers.

That’s cause for concern, said Elio Lannutti, head of the Adusbef consumer group and a senator with the Italian Values party.

“This deal would increase Berlusconi’s reach over the Italian TV industry, with the risk of a monopoly,” he said.

--Editors: Dan Liefgreen, Jerrold Colten

To contact the reporters on this story: Chiara Remondini in Milan at; Elisa Martinuzzi in Milan at

To contact the editors responsible for this story: Kenneth Wong at; Edward Evans at

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