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Vivendi Close to Acquiring Mediaset’s Pay TV Business

Vivendi Chairman Vincent Bollore pictured on a video screen while addressing the company's general meeting...

Under the terms of the deal under discussion, Vivendi and Mediaset will swap a 3.5% stake and take seats on each other’s boards, the people said. Since Vivendi’s market value is roughly six times more than Mediaset’s, it will take control of the Italian firm’s loss-making pay TV unit, valued at around €900 million ($1.02 billion) by some analysts.

The alliance with Mediaset, which could be announced as soon as Friday, is a key step in Vivendi Chairman Vincent Bolloré’s project to build a multilingual, pan-European group to challenge Netflix and pay-TV giant Sky PLC. Vivendi is also working on a new European streaming service, which could be launched as soon as this fall, the people said.

“To face up to Netflix we’re going to have to do something similar,” said one person familiar with Vivendi’s thinking. “They’re the main competitor forcing us to transform and evolve.”

Vivendi also has its sights on the U.S. market, said one of the people familiar with the matter.

Subscription-video-on-demand services such as Netflix and Amazon Inc. AMZN -1.77 % ’s Prime have sent traditional broadcasters scrambling, as they gain millions of customers each year and produce a growing library of their own...