In a deal aimed at expanding his European media empire, Rupert Murdoch, via his consortium of investors, has agreed to pay 1bn euros (�647m; $945) for Telepiu, the Italian pay-TV arm of Franco-American media group Vivendi Universal.

In a few months, the transaction closing will bring an end to the mutual claims between our two companies

Jean Marie Messier Vivendi Universal

In addition, Mr Murdoch will pay 500m to reimburse Telepiu for future Italian Serie A football rights and for the sale of two terrestrial licences.

Telepiu is set to be merged with News Corp's own Italian pay-TV venture, Stream.

The formation will become Italy's only pay-TV operator with about 2.3m subscribers.

Peace at last

Vivendi agreed to the deal with Mr Murdoch's News Corporation because it needs the cash to deal with a massive debt mountain.

The deal should slice 1.2bn euros off the company's debts, Vivendi said.

The deal should also bring to an end months of hostilities between the two rival groups.

As part of the agreement, both said they would put ongoing litigation on ice.

"In a few months, the transaction closing will bring an end to the mutual claims between our two companies, thereby attesting to our shared concern for establishing a relationship of honest competition between News Corp and Vivendi Universal," Vivendi's chief executive Jean-Marie Messier said.

Vivendi's difficulties have almost cost Mr Messier his job as chief executive. On Saturday, he was replaced as chairman by vice-chairman Eric Licoys.

Reversed roles

The merger of the loss making pay-TV operations had been on the cards for a long time.

But two previous attempts at a deal - including one where Telepiu would have taken over Stream - have ended in failure.

The deal is subject to approval from News Corp's partner, Telecom Italia, and to regulatory approval.

Regulators have previously expressed reservations about a merger.

Expansion

The deal marks the end of Mr Messier's expansion push for Vivendi Universal.

While for Mr Murdoch, it marks the start of a long yearned for push into Italy.

Previous talks during recent years with Italy's own media baron, Prime Minister Silvio Berlusconi, have yielded few results.

News Corp is expected to own 50% of the Italian pay-TV operation while the rest would be owned by other investors, possibly including Telecom Italia.