By Deborah Ball 

MILAN--A key pay-TV deal between Mediaset SpA and Vivendi SA hung in the balance Tuesday, after the French media group abruptly changed the terms of a previously signed deal and the Italian broadcaster angrily suggested that it will reject the new proposal as it is.

In April, Vivendi agreed to acquire Mediaset's pay TV unit in a deal that included a 3.5% share swap between the two companies. The deal was to be an important step in Vivendi's ambitions to build a pan-European group strong enough to challenge Netflix Inc. and Sky PLC. It was also seen as a boon to Mediaset, which has long struggled to bring its pay TV unit into the black.

But Mediaset, which is controlled by the family of former Italian Prime Minister Silvio Berlusconi, said Tuesday that the French company sent the Milan-based company a new proposal earlier this week to acquire only 20% of the pay-TV unit, plus 15% of Mediaset itself in three years--a deal that the Berlusconi family's holding company branded as an attempt to launch a creeping takeover.

Speaking with reporters in Milan on Tuesday, Vivendi CEO Arnaud de Puyfontaine said the French company had found that the financial situation of Mediaset Premium differed from what the Italians had disclosed before the deal was signed in April.

On June 21, Vivendi sent a letter to Mediaset, informing the Italian company of "significant differences in the analysis" of Mediaset Premium's results.

But according to Mediaset, the letter didn't contest the financials previously provided. It instead raised doubts about whether Mediaset Premium could break even in 2017/2018 as the company had previously stated, a person familiar with the matter said. Vivendi's doubts stemmed from worsening market conditions, the person added.

The value of the new proposal is approximately equivalent to the April deal, but it would dilute the stake held by Fininvest SpA, the Berlusconi family holding company, in Mediaset to about 30% from 34%. About 63% of Mediaset is publicly traded.

In a statement, Fininvest accused Vivendi of attempting to build "an extremely large stake in Mediaset in an underhanded and unacceptable way."

Mr. Puyfontaine denied the accusation, adding that Vivendi's relationship with Mediaset remains amicable and the company hopes to build a major strategic alliance with Mediaset and Mediaset Premium. "We've proposed an even more ambitious relationship," he said, and rejected the idea that the deal could fall apart. "I don't see an outcome with no solution."

But Mediaset, which meets Thursday to approve first-half results, appears unlikely to approve the new terms.

"The agreement with Vivendi was and still is binding and doesn't envision changes," Marco Giordani, Mediaset's finance director, told Class CNBC television. He added that he is open to a new agreement that is "equal" to or better than the April accord.

The news is a setback to Mediaset, whose pay TV unit has struggled to compete with Sky Italia for years. In recent trading in Milan, Mediaset shares were down 8%.

"This is a huge blow for Mediaset at a time when they had finally got some certainty on the future of the company," said CCS Insight analyst Paolo Pescatore. "Italians haven't shown a huge desire to buy pay-TV and you need to invest heavily in content rights if you want to compete in this market."

"It looked like a crazy deal," said Kepler analyst Conor O'Shea. "If you want to go to Italy that's fine, but why take 100% of the losses of Mediaset Premium?"

Last month, the French antitrust watchdog rejected a proposed alliance between Vivendi' SA's pay-TV Canal Plus and Qatar-controlled beIN Sports, another blow to the French media company's plans.

Canal Plus's pay-TV channels have been losing money in France as they struggle with intense competition for sports rights and from online video services.

Write to Deborah Ball at deborah.ball@wsj.com

(END) Dow Jones Newswires

July 26, 2016 08:57 ET (12:57 GMT)