Mediaset, Italy's biggest commercial broadcaster, is to buy Endemol, the Dutch television production company which has created successful international format programs including Big Brother.
Mediaset, owned by former premier Silvio Berlusconi, and Dutch billionaire John de Mo, will pay Spanish group Telefonica 2.63 billion euros for a 75% stake in Endemol under a deal signed on Monday.
Analysts said the deal was a major success for Mediaset which has been trying to expand beyond Italy's saturated television market and last year failed in its bid to buy German TV network ProSiebenSat1.
Mediaset runs television networks in Italy and Spain, while Endemol has a presence in 25 countries in five continents. The Italian broadcasting group will now have a firm foothold in TV production abroad.
The agreement was widely welcomed in Italy as a rare example of a national company being strong enough to make an important international acquisition.
But commentators also pointed to complications, noting that Endemol supplied many programme formats to Mediaset's chief Italian competitor, the state-owned RAI public television service.
Industry Minister Pierluigi Bersani was one of several public figures who said he hoped the development would encourage state television to be more creative and to think up programmes for itself.
"This is an Italian success," he said. "But everyone will have to think hard now, RAI in particular. I hope this episode sparks reform and change. Public TV service should be a place of innovation".
The small Italy of Values party, which is part of the governing centre-left coalition, said the Endemol deal underlined the need for tougher conflict of interest legislation in Italy.
"We'll soon have a RAI which is forced to do business with a company owned by the opposition leader," it said, referring to Berlusconi, Italy's richest man.
It noted that a bill on conflicts of interest was due to begin its passage through parliament on Tuesday.
NO GOVT INTERVENTION.
It was unclear whether Mediaset's ownership of Endemol would lead RAI to cancel all its contracts with the production company.
Communications Minister Paolo Gentiloni stressed that, whatever happened, the government would play no role in the decision even though the state owned RAI.
"RAI will make its choices by itself," he said.
RAI Director General Claudio Cappon was extremely prudent in his reaction to the development. "This is an important event for the television industry. It will need to be looked at and evaluated carefully when the terms of the accord are clear," he said.
Mediaset denied that it would consider using control of Endemol as a means to spy on RAI. "Endemol remains independent and anyway it would be illegal," said Chairman Fedele Confalonieri.
He also denied planning to sell of Endemol assets in the near future.
Premier Romano Prodi said the Mediaset-Endemol deal clearly strengthened RAI's chief competitor and highlighted the problems faced by the public service, which he said was "paralysed by substantial ungovernability".
He voiced the hope that new norms on how RAI was managed would soon be implemented so that the company could regain some dynamism.
MEDIASET CONSORTIUM WITH CYRTE, GOLDMAN SACHS.
Endemol, which has joint ventures in Britain, Germany, Argentina, Austria and South Africa, was created in 1994 through the merger of the Dutch production companies owned by Joop van den Ende and John de Mol. The name is thus an acronym from the combination of their surnames.
The company was sold in 2000 to the Spanish telecommunications group Telefonica, which five years later floated 25% of it on the stock market.
The deal with Mediaset nets Telefonica a capital gain of some 1.4 billion euros.
Mediaset is buying Endemol through Mediacinco Cartera, a company which includes its Spanish subsidiary Telecinco, together with John De Mol's Cyrte Fund and Goldman Sachs private equity fund GS Capital Partners.
Mediaset will later offer 25 euros a share for the 25% of Endemol which is on the stock market.
Aside from Big Brother, other successful Endemol program formats Wife Swap, Beauty and the Geek, Changing Rooms, Ready Steady Cook, Deal or No Deal, Ground Force, International King of Sports, Star Academy and Fear Factor.
