MILAN (Reuters) - MFE-MediaforEurope, the TV group controlled by Italy's Berlusconi family, on Wednesday reported a sharp decline in first quarter profit as total sales fell, dragged down by its lagging Spanish business.

MFE said its earnings before interest and taxes stood at 6.3 million euros ($7.2 million) from 23.5 million euros in the same period last year. However, the figure was better than an analyst consensus provided by the company of breakeven.

MFE confirmed its targets for the year, including a "strong" cash generation after free cash flow rose by 19% to 254 million euros in the first quarter.

Total consolidated sales at MFE, which runs commercial broadcasters in Italy and Spain, fell to 672 million euros from 700 million euros, broadly in line with a forecast of 670 million euros.

Advertising revenues rose by 1% in its main domestic Italian market, while sales at the Spanish unit fell 6.7%.

MFE, which holds a 30.14% stake in German rival ProSiebenSat.1, made a low-ball cash-and-share bid valued at 940 million euros for the Munich-based group in March under plans to create a pan-European broadcaster.

Milan-listed MFE is now weighing whether to raise its bid in response to a counter proposal by Czech investment firm PPF, a source close to the matter told Reuters last week.

PPF, which holds a 15% stake in ProSieben, offered a higher price to increase its stake in the Frankfurt-listed group up to 29.99%.

Having already crossed a 30% threshold which normally triggers a mandatory 100% takeover offer under German law, MFE will have the option to buy additional shares in the market after the end of its buyout bid.

($1 = 0.8814 euros)

(Reporting by Elvira Pollina; Editing by Keith Weir)