By Elvira Pollina
MILAN (Reuters) - Italian broadcaster Mediaset <MS.MI> and its second biggest shareholder Vivendi <VIV.PA> are struggling to reach a deal to end a long-running legal battle as a court-imposed deadline nears, four sources close to the matter said.
A Milan court gave the two parties until Nov. 22 to attempt to reach a compromise after Vivendi challenged a plan by Mediaset to set up a Dutch holding company to pursue expansion in Europe.
The four sources said the two sides had failed so far to hammer out the details of a settlement that would allow them to drop a number of pending lawsuits.
Failure to reach a deal would likely complicate the pan-European project by Mediaset, which is controlled by the family of former Italian Prime Minister Silvio Berlusconi.
It would also keep both companies locked in a protracted legal dispute which analysts say is distracting them from efforts to tackle increasing industry competition from streaming services like Netflix <NFLX.O> and Amazon Prime <AMZN.O>.
A potential compromise could see Vivendi slash its stake in Mediaset, sources said last week.
But the price at which Vivendi could sell its Mediaset shares remains a sticking point, two sources said.
Mediaset has offered to buy back the shares, potentially in a consortium with other investors, at 2.77 euros each, one source said. At that price, Vivendi could face a loss of 25% compared with what it paid back in 2016 to build its stake.
The shares traded at 2.64 euros at 1455 GMT on Wednesday.
Vivendi could be willing to book a loss on the investment as part of an out-of-court settlement that entailed Mediaset dropping all legal complaints including multi-billion damage claims, one source close to the matter said.
Mediaset, however, would want to be compensated for dropping all legal claims in a settlement deal, two sources said.
"Both companies need to move on and avoid wasting any more time ... a last minute deal remains a possibility," one of the sources added.
Vivendi and Mediaset have been at odds since the French conglomerate in 2016 pulled out of an 800 million euro (£685 million) agreement to buy Mediaset's loss-making pay-TV unit. Vivendi went on to build a 29% stake in Mediaset, which the Italian broadcaster considers hostile.
Conflict escalated after Mediaset last summer launched a corporate reorganisation to merge its Italian and Spanish businesses under a Dutch holding company.
Mediaset wants to use the new entity to pursue tie-ups in Europe, including a potential merger with German peer ProSiebenSat.1 <PSMGn.DE>.
Vivendi has challenged Mediaset's corporate overhaul in the courts, saying the proposal would allow the Berlusconi family's holding company Fininvest to tighten its grip on the company.
Last month, a Spanish court put Mediaset's corporate overhaul on hold, ruling in favour of a Vivendi request.
ADVERTISEMENTVivendi has also asked a Milan court to freeze the reorganisation but a judge postponed any decision and gave the two sides until the end of this week to reach an agreement.
(Additional reporting by Gwenaelle Barzic in Paris,; Editing by Alexandra Hudson)
