* MFE seeks to buy out Media Espana investors

* Bid values Spanish business at around $1.9 billion

* MFE has also built stake in Germany's ProSieben

MILAN, March 16 (Reuters) - Commercial TV firm MediaForEurope (MFE) moved towards creating a continental force to take on the streaming giants with a share and cash offer for full ownership of Mediaset Espana.

Controlled by the family of former Italian Prime Minister Silvio Berlusconi, MFE sees cross-border consolidation as the best way for traditional broadcasters to protect their turf.

The bid for the remaining 44% in Mediaset Espana that MFE does not already owns offers a 12.1% premium over Mediaset Espana's last closing price and values it at around 1.76 billion euros , according to Reuters calculation.

MFE, itself previously known as Mediaset, said it would offer 4.5 of its ordinary A shares and 1.860 euros in cash for each Mediaset Espana share, for a total valuation of 5.613 euros a share.

"The offer represents an important step forward in the creation of a pan-European media and entertainment group," MFE said in a statement.

Earlier this week, MFE said it had crossed a 25% threshold in ProSiebenSat.1, voting rights as it increased its stake in the German TV group by buying shares on the market.

"MFE will continue to invest in ProSiebenSat.1 Media confirming the vision of strengthening the European media sector", MFE CEO Pier Silvio Berlusconi said on Tuesday.

Sources have previously told Reuters MFE, which is the single largest investor in the German TV group, is ready to increase its stake further in the coming weeks, without crossing a 30% ceiling that would trigger a mandatory takeover.

NEGATIVE REACTION

Market reaction to the Mediaset Espana offer was negative on Wednesday, with traders and analyst citing lower synergies compared with a previous attempt to combine Mediaset's Italian and Spanish businesses in 2019.

MFE said it would target at least 55 million euro pre-tax synergies in four years, nearly a half of those seen in the previous failed attempt to unite the businesses.

"We argue that 62% of targeted synergies are revenue synergies, which look more challenging than cost savings, especially in the macro and geopolitical environment", Intesa Sanpaolo analysts wrote in a research note.

MFE A shares ended 11% down at 0.74 euros, while MFE B shares were 1.6% lower at 1.16 euros. Mediaset Espana shares, meanwhile, were 4.3% lower at 4.90 euros.

As part of its offer to buy out its Spanish unit, MFE will issue up to 624.4 million ordinary A shares, which would dilute Berlusconi's holding company voting stake to 48.5%, it said.

UniCredit is advising MFE together with BofA on the transaction and is acting as sole underwriter.

The previous merger attempted was blocked by a Spanish court amid a broader dispute with Mediaset second-largest investor Vivendi settled last year.

The company then moved its legal headquarters to the Netherlands and adopted a dual share structure, with a 10-to-1 ratio for voting rights in a bid to have greater flexibility for financing potential deals. ($1 = 0.9140 euro) (Reporting by Giulio Piovaccari and Elvira Pollina; writing by Giulio Piovaccari; Editing by Keith Weir)