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* Special board meeting to be held on Friday - sources
* Reorganization to involve Spanish unit - source
* Move to Netherlands could help possible deal with ProSiebenSat (Adds details, ProSieben comment)
MILAN, June 7 (Reuters) - Italian broadcaster Mediaset is likely to move its legal headquarters to a holding company in the Netherlands as part of a reorganization that could help pave the way to creating a pan-European TV company, two sources close to the matter said.
The corporate reorganization is expected to be announced on Friday after an extraordinary board meeting, the sources said.
Mediaset, controlled by the family of former Prime Minister Silvio Berlusconi, has made no secret of its ambition to become the first free pan-European broadcaster and last month bought a stake in German rival ProSiebenSat.1.
But so far, attempts at cross-border deals to create a so-called 'Euroflix' have come to nothing, stymied by a lack of synergies - a result of the many languages and varied tastes of viewers across the region.
A spokesman for Mediaset, in which French media giant Vivendi owns a 28.8% stake, declined to comment on the reorganization.
The reorganization is expected to involve Mediaset's Spanish unit, but the company denied a report it planned to buy out minority investors in Mediaset Espana, in which it has a 52% voting stake.
Mediaset and ProSieben, as well as European rival RTL Group and Britain's ITV, are struggling with weak advertising revenues as younger viewers shift to streaming offerings from Netflix and Amazon Prime.
ProSiebenSat, which has repeatedly denied being in merger talks with Mediaset, said it was not involved in the reorganization.
"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," Chief Executive Max Conze said.
He reiterated ProSieben was focusing on next month's launch of its streaming joint venture with Discovery Inc, called Joyn, as well as initiatives to develop 'smart' advertising.
Mediaset shares were up 2.8 percent to 2.69 euros at 1101 GMT amid speculation the move in legal headquarters would pave the way for a deal with ProSieben. Shares in Mediaset Espana were suspended from trading pending a statement, after earlier rising 8.7 percent.
Mediaset, with a market capitalisation of just under 3 billion euros ($3.4 billion), spent around 330 million euros to invest in ProSieben.
It has said it could raise up to 1 billion euros for potential acquisitions, and recently introduced a loyalty share scheme that rewards long-term investors by doubling their voting rights. The Berlusconi family, through holding company Fininvest, has a 44% stake in the company.
The Milan-based broadcaster tried to broaden its business in 2016 with a pay-TV agreement with 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 was later forced by Italian regulators to transfer most of its voting rights in Mediaset into a trust because of competition concerns.
($1 = 0.8878 euros) (Additional reporting by Joern Poltz; Writing by Silvia Aloisi, Editing by Jason Neely and Mark Potter)