* Companies locked in multi-year legal battle
* Court deadline looms on Nov. 22 to reach compromise
* Number of hurdles make deal hard but not impossible-source
By Elvira Pollina
MILAN, Nov 20 (Reuters) - Italian broadcaster Mediaset and its second biggest shareholder Vivendi are struggling to reach a deal to end a long-running legal battle as a court-imposed deadline nears, four sources close to the matter said.
A Milan court gave the two parties until Nov. 22 to attempt to reach a compromise after Vivendi challenged a plan by Mediaset to set up a Dutch holding company to pursue expansion in Europe.
The four sources said the two sides had failed so far to hammer out the details of a settlement that would allow them to drop a number of pending lawsuits.
Failure to reach a deal would likely complicate the pan-European project by Mediaset, which is controlled by the family of former Italian Prime Minister Silvio Berlusconi.
It would also keep both companies locked in a protracted legal dispute which analysts say is distracting them from efforts to tackle increasing industry competition from streaming services like Netflix and Amazon Prime.
A potential compromise could see Vivendi slash its stake in Mediaset, sources said last week.
But the price at which Vivendi could sell its Mediaset shares remains a sticking point, two sources said.
Mediaset has offered to buy back the shares, potentially in a consortium with other investors, at 2.77 euros each, one source said. At that price, Vivendi could face a loss of 25% compared with what it paid back in 2016 to build its stake.
The shares traded at 2.64 euros at 1455 GMT on Wednesday.
Vivendi could be willing to book a loss on the investment as part of an out-of-court settlement that entailed Mediaset dropping all legal complaints including multi-billion damage claims, one source close to the matter said.
Mediaset, however, would want to be compensated for dropping all legal claims in a settlement deal, two sources said.
"Both companies need to move on and avoid wasting any more time ... a last minute deal remains a possibility," one of the sources added.
Vivendi and Mediaset have been at odds since the French conglomerate in 2016 pulled out of an 800 million euro agreement to buy Mediaset's loss-making pay-TV unit. Vivendi went on to build a 29% stake in Mediaset, which the Italian broadcaster considers hostile.
Conflict escalated after Mediaset last summer launched a corporate reorganisation to merge its Italian and Spanish businesses under a Dutch holding company.
Mediaset wants to use the new entity to pursue tie-ups in Europe, including a potential merger with German peer ProSiebenSat.1.
Vivendi has challenged Mediaset's corporate overhaul in the courts, saying the proposal would allow the Berlusconi family's holding company Fininvest to tighten its grip on the company.
Last month, a Spanish court put Mediaset's corporate overhaul on hold, ruling in favour of a Vivendi request.
Vivendi has also asked a Milan court to freeze the reorganisation but a judge postponed any decision and gave the two sides until the end of this week to reach an agreement. (Additional reporting by Gwenaelle Barzic in Paris, Editing by Alexandra Hudson)