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Italian establishment launches counter-bid for RCS Mediagroup

[MILAN] Italy's corporate establishment rushed to the defence of the country's most influential publisher on Monday with the launch of a takeover offer for RCS Mediagroup aimed at preventing it falling into the hands of an ambitious media tycoon.

The consortium, including investment bank Mediobanca and tyremaker Pirelli, have offered to pay 776 million euros (S$1.2 billion), including debt, for the publisher of Corriere della Sera, Italy's top-selling mainstream newspaper.

The cash bid trumps an offer from Cairo Communications , which is headed by Urbano Cairo, who made his fortune outside the establishment, just like his old employer and mentor, ex-prime minister and media magnate Silvio Berlusconi.

Private equity fund Investindustrial is also backing the consortium offer for RCS, which has lost 1.3 billion euros since 2011 but has traditionally punched well above its weight with Corriere della Sera.

Media ownership remains a powerful tool in Italy where newspapers still shape the debate in politics and business, despite a broader decline in public readership.

Corriere is closely read by politicians, chief executives and government officials, and could have an important role to play as Italy approaches an October referendum on Prime Minister Matteo Renzi's flagship constitutional reform.

"The value of the deal goes beyond the financial aspects. It is still strategically significant to control Corriere della Sera because it's the most important newspaper in the country," said Marco Giorgino, professor of finance and risk Management at Milan's Politecnico University.

The newspaper's circulation is bettered only by sports daily Gazzetta dello Sport, also published by RCS.

Mediobanca and Pirelli are already core shareholders of RCS, along with another two members of the bid consortium: Diego Della Valle, majority owner of his family's leather goods company Tod's, and insurer UnipolSai.

Under the offer, the four shareholders will transfer their combined 22.6 per cent stake in RCS to a newly created company, that will then buy all remaining shares at 0.70 euros each, or some 30 per cent more than Cairo's offer.

They and Investindustrial, founded by Andrea Bonomi, scion of one of Italy's most prominent industrial families, also offered to fund a capital increase at the publisher for up to 150 million euros.

Investindustrial, which last month agreed to buy Italy's best-known baby products brand Chicco, is to own 45 per cent of the new company acquiring RCS.

In April, Cairo Communication made an all-share offer of 0.12 Cairo shares for every RCS share, valuing RCS at 0.532 euros per share based on Cairo's closing price on Friday. Several RCS investors say the Cairo bid is too low.

Cairo, which is being advised by Intesa Sanpaolo, already owns 4.7 per cent of RCS. Intesa Sanpaolo, also a RCS shareholder, has publicly backed Cairo's offer.

Analysts said they expected the consortium's cash offer to prevail. RCS shares closed up 16.6 per cent at 0.6935 euros, just below the level of the consortium bid.

The tussle for RCS was triggered by car maker Fiat Chrysler Automobiles' decision in March to sell its 16.7 per cent stake in the publisher.

The bid battle promises to accelerate a restructuring of the RCS group, which has around 500 million euros in debt due to an ill-fated acquisition in Spain. It also struggles with weak advertising and declining circulation.

RCS last made a profit in 2010.

The rival offers depend for their success on the company's creditors agreeing to freeze debt repayments until early 2018.

Mr Cairo, who is also president of the Torino soccer club, told reporters at the Turin book festival he wanted to examine the rival bid before deciding whether to raise his own offer, AGI newsagency reported.