Vivendi SAand Italy's MediasetGroup are reportedly close to a stake swap agreement, which wouldallow the French mediagroup to gain control of the latter's pay TV unit Mediaset Premium.

The deal could be announced as early as the week of April 4,Bloomberg News reported April 1, citing sources familiar with the negotiations.

Under the proposal, Vivendi and Mediaset are planning toexchange holdings of less than 5%. As Vivendi's market value is about 6x higherthan Mediaset's, the deal will be compensated with the sale of a majority stakein Mediaset Premium.

The transaction will reportedly allow Vivendi and Mediasetto form a pan-European pay TV alliance, in a bid to challenge .

The purchase of Mediaset Premium in cash or shares is stillan option, Reuters reported the same day, citing a source mentioned by Le Monde.

So far, Mediaset has denied reports about a possible deal.