Controlled by the family of former Italian prime minister Silvio Berlusconi, Mediaset approved a merger of its Italian and Spanish units under a Dutch holding company, called MediaforEurope (MFE) last September.

But Vivendi, led by French billionaire Vincent Bollore and a major shareholder in Mediaset, is fighting the project in courts across Europe, saying the governance structure of the new entity would strengthen the Berlusconis' grip on the company.

The two feuding companies responded to the decision in contrasting ways on Monday.

Vivendi said it would appeal against the ruling, while Mediaset said the MFE project was "confirmed and will go

ahead."

As things stand, the reorganisation remains on hold because a Spanish judge last year ruled in favour of Vivendi's request to suspend it. The Milan judge's decision could help the Italian broadcaster to overturn the suspension in Spain.

Mediaset wants to use the new holding company to pursue tie-ups with other European peers, in a bid to create a pan-European TV champion to tackle growing competition in the industry from streaming rivals such as Netflix.

It has already built up a 15% stake in German broadcaster ProSiebenSat.1 .

DIFFICULT PATH

In an effort to push through its plan, Mediaset shareholders approved changes to MFE's bylaws on Jan. 10, as suggested by the Milan court. However, Vivendi said the changes did not address its concerns.

Mediaset faces a March deadline to see its Dutch holding company plan through, otherwise the decisions of a September shareholder meeting that approved the project will no longer be valid based on existing Dutch laws.

Vivendi and Mediaset have been at odds since the French conglomerate dropped a deal to buy Mediaset's pay-TV unit in 2016 and then built up a 29% stake in the group, which the Italian broadcaster considers hostile.

Two-thirds of that stake is held in a trust, following a ruling by the Italian telecoms watchdog over Vivendi's excessive presence in the country's media and telecoms sectors, given its 24% holding in Telecom Italia as well.

Mediaset's shares ended 0.9% higher on Monday but the deadlock with Vivendi and uncertainty over the future of the Italian broadcaster growth plans has weighed on the stock, which is down 9% since the start of this year.

By Elvira Pollina