UPDATE 1-Italy's Mediaset builds a stake in Germany's Prosiebensat

Elvira Pollina

(Adds market reaction, details)

MILAN, May 29 (Reuters) - Italian largest commercial broadcaster Mediaset has built a 9.6% stake in German peer ProSiebenSat.1, it said on Wednesday, in a move that could pave the way to the creation of a pan-European TV player and lifted the German company's shares.

Mediaset, controlled by former Prime Minister Silvio Berlusconi's holding company Fininvest, has in recent months repeatedly raised the idea of a cross border tie-up to fend off competition from global rivals such as Netflix.

The Italian company, which also controls Spanish free-to-air broadcaster Mediaset Espana, is now ProSieben's second- largest shareholder in term of voting rights, after Capital Research Global Investors.

"The friendly acquisition of a stake in ProSiebenSat.1 is a long-term choice," Mediaset CEO Piersilvio Berlusconi said in a statement.

At yesterday's market prices, the stake is worth around 330 million euros ($368 million).

Last month, Mediaset's finance chief said the group could take up 1 billion euros in new financing for potential acquisitions.

Mediaset said the deal would not affect a decision on a dividend payment expected in July.

Mediaset tried to broaden its business in 2016 with a pay-TV agreement with French media giant Vivendi aimed at building a southern European media powerhouse.

But the deal fell through when Vivendi, which owns 28.8 percent of the Italian group, backtracked, leading to a court battle.

Prosiebensat shares rose 6.9% in early trading, while Mediaset shares were up 0.6%. ($1 = 0.8967 euros) (Reporting by Elvira Pollina; editing by Francesca Landini, Susan Fenton and)