By Elvira Pollina and Mathieu Rosemain

MILAN (Reuters) – Merger and acquisition speculation has lifted shares in MFE, the late Silvio Berlusconi’s TV business, following his death, but a number of obstacles stand in the way of any rapid deal.

With a 19.8% MFE stake, Vivendi is widely seen as the natural buyer for MFE. However, legal disputes have created bad blood between Vivendi’s leading investor Vincent Bollore and the only two of Belusconi’s five children actively involved in the businesses, three people close to the matter told Reuters.

Current market prices imply a loss on any sale of the 41.5% stake in MFE held by the family’s holding company Fininvest at a book value of around 1 billion euros ($1.1 billion).

TIME TO SELL?

This week’s rally has lifted the market value of the whole of MFE to 1.8 billion euros.

With the founder out of the picture, bankers say some of Berlusconi’s heirs could be more open to selling the asset given a fast-changing media landscape, though people familiar with the family’s thinking said the heirs have always been united.

Rival media tycoon Urbano Cairo, who built his career in advertising at Berlusconi’s empire in the 1980s and 1990s and owns Corriere della Sera daily and TV channel La7, has studied the file closely, several people said.

But the former prime minister’s wealth is such that he could leave MFE solely to his son, MFE CEO Pier Silvio Berlusconi, and still ensure each heir receives an equal share of his legacy, as mandated by local inheritance laws.

Pier Silvio Berlusconi has headed MFE since 2015 after rising through the company ranks. He is the force behind the international expansion strategy MFE is pursuing.

PROSIEBEN STAKE AND EUROPEAN STRATEGY

Betting on European consolidation, MFE has built a large stake in Germany’s ProSiebenSat.1 to counter the threat to free-to-air TV from streaming giants and other digital players competing for advertising revenues.

In 2020 Fininvest snubbed an approach by U.S. group Warner Bros. Discovery because it did not want to relinquish control of the broadcaster that controls three TV channels in Italy and two in Spain as it worked on further European expansion.

CAN VIVENDI AND FININVEST TRUST EACH OTHER?

On Monday, Fininvest said there would be no changes in the way its businesses are run.

Any accord between Vivendi and Fininvest would require overcoming the deep distrust between the two groups after years of courtroom battles sparked by a failed 2016 TV deal.

A 2021 accord that ended the legal war would need to be redrawn should Vivendi raise its stake.

Like Fininvest, Vivendi faces a loss on any potential sale of its MFE stake given the gap between book and market prices.

Although the settlement accord between Vivendi and MFE would entail the French group gradually selling down most of its stake, a disposal is not required as long as MFE shares trade below 1.375 euros.

B-shares were little changed at 0.753 euros on Wednesday. A-shares retreated slightly at 0.563 euros each.

WOULD ITALY’S GOVERNMENT WEIGH IN?

The key to Berlusconi’s political ascent, television remains a sensitive business for governments.

Under Italian law, Rome has powers to fend off unwanted interest in sectors deemed of strategic importance.

Before winning over the Italian government, any buyer would need to get the Berlusconis on board. Governance rules put the ball firmly in their court.

In 2021 MFE moved its registered offices to the Netherlands, where Fininvest owns 50% of the voting rights and can more easily approve any extraordinary deals because local rules only demand a qualified majority from shareholders in very few cases. ($1 = 0.9259 euros)

(Additional reporting by Emilio Parodi; Writing by Valentina Za; editing by Barbara Lewis)

---