UPDATE 2-ProsiebenSat, Mediaset deny talks on creating pan-European TV company

(Updates with ProSieben CEO quote)

MILAN/FRANKFURT, May 31 (Reuters) - Broadcasters ProSiebenSat.1 and Mediaset denied a newspaper report on Friday that they were in talks on creating a pan-European TV company after the Italian media house bought a 9.6% stake in its German rival this week.

The holding company would be based in the Netherlands or Belgium and not in countries such as Italy, Spain or Germany where the broadcasters have much of their business, Italian daily Il Messaggero reported, citing a plan drawn up by Mediaset’s adviser Citi.

“We are not engaged in such discussions. We are making good progress in executing our strategy and are fully focused on developing ProSiebenSat.1 into a digital and future-ready company,” ProSieben CEO Max Conze said.

ProSieben was focusing on the launch next month of its streaming joint venture with Discovery Inc, called Joyn, as well as initiatives to develop ‘smart’ advertising, Conze added in a statement.

Separately, a Mediaset spokesman also denied the company was in talks with ProSieben on forming a pan-European TV group. Citi was not immediately available for comment.

Mediaset this week became ProSiebensat’s second largest shareholder, building a stake in its German peer following months of speculation it wanted to merge with the Munich-based operator.

Mediaset, which is controlled by the holding company of the family of Italian former prime minister Silvio Berlusconi has made no secret of its ambition to become the first free pan-European broadcaster.

The Milan-based broadcaster tried to broaden its business in 2016 with a pay-TV deal with French media group Vivendi aimed at building a southern European media powerhouse.

But the deal fell through when Vivendi backtracked, leading to a court battle that soured relations between the two. Vivendi has a 28.8% holding in Mediaset.

Mediaset shares were up 1%, while ProSiebensat shares are down 0.6% in Friday afternoon trading. (Reporting by Elvira Pollina and Stephen Jewkes in Milan, Douglas Busvine in Frankfurt Editing by Keith Weir)