Televisa Balks at Univision Deal


Univision Communications may have accepted a $13.7 billion bid to be acquired by a group of investors, led by Haim Saban’s Saban Capital, but Grupo Televisa is crying foul over the decision.

The Mexican broadcaster -- which led a rival consortium’s bid for the Spanish-language media giant here in the States -- said in a prepared statement that it was “disappointed” in the auction’s outcome and that “it has a number of alternatives it is considering.”

Under Univision bylaws, Televisa -- which owns an 11% stake in the media company and supplies it with much of its programming -- can veto a sale of the company, which also operates broadcast network TeleFutura and cable service Galavisión. However, a 60% vote by Univision shareholders could overturn such a gambit.

Univision said Tuesday morning that it accepted the $13.7 billion bid -- $36.25 per share in cash, plus the assumption of $1.4 billion in debt -- from Saban Capital, overseen by Haim Saban, the media mogul who formerly was a partner in Fox Family Channel (now known as ABC Family), along with Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group and Thomas H. Lee Partners. The agreement is expected to close next spring.

Televisa’s attempts to structure a bid last week were hampered by defections from private-equity firm Carlyle Investment Management, Blackstone Management Associates and Kohlberg Kravis Roberts and Venezuelan broadcaster Venevision, which holds a 14% stake in Univision and also supplies it with programming.

Televisa -- the remaining investment partners of which were Bain Capital and Cascade Investments, the investment vehicle of Microsoft chairman Bill Gates -- has long been odds with Univision over an unfavorable programming-supply contract, which remains the subject of a lawsuit and which runs through 2017, providing the broadcaster with much of its popular telenovela fare.

In the past, Univision president and chief operating officer Ray Rodriguez has described the programming contract, which commenced in 1992, as “ironclad.” Moreover, following this year’s upfront advertising presentation in New York in May, Rodriguez said the parties were also in a “dispute” over which holds the rights to stream full episodes of novellas on the Internet in the United States.
Given the contentious nature of the programming contract and Televisa’s stake in Univision, market analysts and observers suggested that the deal may yet take other turns.

Philip Remek, senior media analyst at Guzman & Co., said another Televisa-led bid is “possible, but not likely, given the high valuation. Making an even higher bid would involve considerable risk. Even this valuation is quite high. We are talking more than 17 times EBITDA [earnings before interest, taxes, debt and amortization] and 35 times earnings. That is a nosebleed valuation. The new team has their work cut out for them.”

José Cancela, principal of consultancy Hispanic USA and former senior executive at Univision and rival Spanish-language broadcaster Telemundo, disagreed.

“At this level, you don't just say, ‘They didn't accept my offer, and I am going home.’ “We haven't seen the end of this yet,” he said. “Saban is buying a television network, radio stations, etc., but he is also buying himself a lawsuit. He is willing to pay $12 billion and fight with his biggest program supplier. I guess he really is a Power Ranger."

The latter was a reference to Saban’s interest in Mighty Morphin Power Rangers, the live-action-series franchise he adapted for the United States based on Japanese series Kyouryua Sentai ZyuRanger.

Luis Echarte, chairman of Azteca America, another Spanish-language network, believes patching up the relationship with the program supplier will be at the top of the consortium’s to-do list.

"The first thing [Saban] is going to have to do is negotiate and reach an agreement with Televisa,” he said.

Merrill Lynch media analyst Jessica Reif Cohen feels that a broader pact could be reached with Televisa -- somewhere down the road. In a research note, she wrote that the winning consortium will ultimately want to sell Univision, and Televisa “remains the logical buyer. We believe the outcome of this transaction is positive for both Univision and Televisa, given the ways both parties can work together to create more value” for the latter’s programming, including U.S. Internet rights.

Merrill Lynch also believes the Saban group could deleverage the transaction via asset sales, notably by divesting Univision’s radio stations and music business.