While the owners of Univision Communications have held preliminary discussions in recent weeks with several media companies, including CBS and Time Warner Inc., so far, there seems to be no movement. Price and Univision’s $9B debt load are to blame, says an LA Times story.
Univision is controlled by a consortium of investors including billionaire Haim Saban (Saban Capital Group), Texas Pacific Group, Providence Equity Partners, Madison Dearborn Partners and Thomas H. Lee Partners. They are seeking north of $20 billion for the company. The group bought Univision for $13.7 billion, including debt, in early 2007.
The owners had been expected to take the company public in a stock offering in 2015, paving the way for them to exit, though those plans aren’t set yet. The owners had also looked to Mexican media conglomerate Grupo Televisa SA, which owns a minority stake of Univision and supplies much of its programming, as a possible buyer. But Televisa’s ability to acquire Univision rests on changes in regulatory rules capping foreign ownership in broadcasters at 25%. While the FCC voted to allow exemption to that cap on a case-by-case basis last fall, a person familiar with the situation said the regulatory climate for a Televisa acquisition remains uncertain.
Univision is seen as a jewel on Wall Street because of the growing importance of Latinos in the U.S. market. Analysts point out that Univision could be a big catch for a company looking to expand in Spanish-language media.
“It is a unique set of assets reaching a huge target market: the Hispanic audience,” David Joyce, a managing director and media analyst at International Strategy & Investment told the LA Times. “Univision has highly desirable content assets in a world of distribution consolidation.”
From the story: “The problem has been that Saban and his partners paid top dollar…when they bought the company at the top of the market in 2007. They also have struggled to pay down the mountain of debt, brought on by their leveraged buyout to take the company private.
The ownership group’s members are also not in agreement on the timing of a sale. They have been divided over whether to keep Univision for a couple more years to whittle down debt and increase their equity, according to the story.
Univision owners’ first stop was to see CBS Corp. Chief Executive Leslie Moonves, figuring that he might jump at the opportunity to join together two dominant TV companies. But Moonves scoffed at the price tag, people familiar with the talks said. He recognized that a proposed merger would invite investor scorn and regulatory headaches because both companies own dozens of TV stations. A combination would exceed the federal government’s cap on station ownership.
Then last week, Saban met with Time Warner Inc. Chief Executive Jeff Bewkes. He also thought the price was too high and expressed concerns about the factions among Univision’s ownership. Bewkes also told Saban that he “didn’t see any real synergies” between Univision and his company, the people said.”
Saban, Univision’s Chairman, made a fortune with the “Mighty Morphin Power Rangers” children’s program, appears to be timing his pitch of the company to coincide with the World Cup. Univision has been garnering gigantic ratings with its broadcasts of the international soccer tournament.
The company’s finances have also been improving. Last year, revenue increased nearly 8% to $2.6 billion.”
Noted Francisco Montero, Managing Partner, Fletcher, Heald & Hildreth, P.L.C.: “Univision’s efforts to find a suitor seem to be boxed in by a combination of price, Federal regulations and internal disagreement among investors. The newly-tightened TV ownership rules regarding TV JSA attribution, limits the field among domestic broadcasters. Although Univision led the charge to relax exemptions to the FCC’s foreign ownership restrictions, this rule relaxation wouldn’t be nearly enough to gain regulatory approval for an outright sale to Televisa or another foreign media company. And now it appears that some investors want out. Gerry Perenchio bought Univision in the early 1990s from the Hallmark greeting card content and built Univision to the powerhouse it became in the 2000s. His only real partner was Televisa. When Perenchio marketed the company for sale, he was in a nasty fight with Televisa which had sued Univision and was threatening to terminate the valuable Program Services Agreement which gives Univision access to Televisa’s valuable program library. That mess was all handed over to Saban and his investors for a whopping $13.7 billion, including debt. Then Saban had to negotiate a new deal with Televisa from a position of weakness. That makes for a high nut and few interested partners.”
See the full LA Times story here
RBR-TVBR observation: Look what we have here—a marketplace rife with mega media mergers, but when it comes to mergers including broadcast TV stations, companies are just too afraid to go there, given the way the FCC has been changing the rules in mid-stride and the uncertainty from Congress. Yes, the price it too high given the debt, but we’re not even hearing counter-offers or protracted negotiations going on. Simply “No,” as the story said. Seems the FCC paves a golden road for cable mergers, but for broadcast mergers, it’s a rocky path.
