UPDATE 1-Italy's RCS sells book unit to Berlusconi-controlled Mondadori

(Adds details, shares)

MILAN, Oct 5 (Reuters) - Italian publisher RCS MediaGroup has agreed to sell its book unit to Arnoldo Mondadori Editore in a 130 million euro ($146 million) deal that will cut its debt and cement its rival’s market leadership.

The acquisition brings the domestic market share of Mondadori, controlled by the family of former Prime Minister Silvio Berlusconi, close to 40 percent.

The signing of the agreement was delayed by differences over the pricing of antitrust risks, sources told Reuters last week, as a deadline to wrap up exclusive talks expired on Sept. 30.

Mondadori will pay 127.5 million euros in cash to buy publishing houses Rizzoli, Bompiani, Fabbri and Marsilio. The deal includes 2.5 million euros in debt, RCS said in a statement.

Shares in RCS rose 4.8 percent by 1035 GMT, while Mondadori shares gained 3 percent.

A conditional approval from Italy’s competition watchdog will not prevent the deal from closing or change its financial terms, RCS said.

The sale will allow RCS to significantly cut its 526 million euro debt, broker ICBPI said in a note.

The loss-making publisher of daily newspaper Corriere della Sera wants to renegotiate its debt to improve terms. However, it first needs to meet goals agreed with creditor banks to avoid having to raise cash from shareholders.

“Sector dynamics worldwide are pushing publishers to join forces,” Mondadori Chairwoman Marina Berlusconi said in a note.

“That is a process all the more necessary in Italy, where operators are much smaller compared to other leading countries.”

RCS, whose shareholders include the Agnelli family, merchant bank Mediobanca and Tod’s owner Diego Della Valle, has seen revenues decline as companies cut advertising in a weak economy and online competition bites.

Earlier this year RCS sold its stake in a group that owns popular radio stations Radio 105, Virgin Radio and Radio Montecarlo. Broadcaster Mediaset, also controlled by the Berlusconi family, later invested in the radio group.

The RCS Libri deal envisages a price adjustment mechanism, worth a maximum of plus or minus 5 million euros, and an earn-out in favour of RCS worth up to 2.5 million euros. ($1 = 0.8879 euros) (Reporting by Stephen Jewkes and Valentina Za)