Last September, giant French pay-TV company Canal+ announced its acquisition from Richemont SA and MIH Ltd of the European television operations of Nethold. That deal is due to close in April. Even before completion it led last month to a smart piece of corporate finance: a Ffr2 billion issue by Canal+ of five-year bonds exchangeable into shares of the leading Italian commercial television and media company Mediaset.
Bonds exchangeable into an issuer's own shares or its parent's are common: bonds exchangeable into an already purchased block of shares of a third party company are much rarer. This deal takes the concept to a new and previously unheard of level: a convertible into shares which the issuer doesn't even own yet. It was an opportunistic, almost cheeky transaction, but one that may point the way for other European companies to be much more dynamic in financing and hedging their cross-shareholdings in each other.
Nethold, which has growing television interests in Belgium, the Netherlands, Nordic countries and Italy, had acquired 6.5% of Mediaset in 1995, when Fininvest, the company of Silvio Berlusconi which at that time owned 100% of Mediaset, sold down 18.5% of the company to three strategic investors.