MILAN (Reuters) - Vivendi VIV.PA could reduce its holding in Italian broadcaster Mediaset MS.MI in a potential deal to end a long-running legal row between the two companies, three sources close to the matter said on Friday.

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Such a deal would help a European expansion plan by the broadcaster controlled by the family of former Italian prime minister Silvio Berlusconi, which is opposed by the French media group led by billionaire Vincent Bollore.

Mediaset is trying to create a pan-European TV champion known as MediaForEurope, to take on competition from streaming app services like Netflix NFLX.O.

Vivendi has challenged this plan and the two have been given until the end of next week by an Italian court to attempt to reach a compromise.

Under a potential settlement, Vivendi could cut its 29% stake in Mediaset, the sources said. One source said the French group could keep a smaller stake in MediaForEurope.

No decision has been taken yet and talks may eventually fall apart, the sources said.

Vivendi and Mediaset have been at odds since the French conglomerate pulled out of an 800 million euro agreement to buy Mediaset’s loss-making pay-TV unit in 2016.

Vivendi went on to build its stake in Mediaset, which the Italian broadcaster considers hostile.

The two groups have been embroiled legal spat ever since.

Mediaset earlier this year launched a corporate reorganization plan to merge its Italian and Spanish businesses under Dutch holding company MediaForEurope.

Mediaset this week raised its stake in German rival ProSiebensat.1 PSMGn.DE to 15% and CFO Marco Giordani on Friday said it could raise it further to 20%.

Giordani also repeated a call for ProSieben to join MediaForEurope.

Vivendi has challenged Mediaset’s corporate reorganization plan in the courts, saying the proposal would allow Berlusconi’s holding Fininvest to tighten its grip on the group.

Last month, a Spanish court put Mediaset’s corporate overhaul on hold, ruling in favor of a Vivendi request.

Vivendi has also asked a Milan court to freeze the Mediaset’s reorganization but a judge last week postponed any decision to Nov. 22, giving the two sides time to reach an agreement on the disputed corporate governance issues.

As part of the attempt to reach a deal, the two groups are negotiating ways to resolve or curb their multiple disputes ahead of next week’s court deadline, people familiar with the situation said.