Univision Communications’ owners are looking for an exit.
Los Angeles billionaire Haim Saban and his four private equity partners are trying to unload their stakes in the nation’s biggest Spanish-language broadcaster. The media giant is seen as a jewel on Wall Street because of the growing importance of Latinos in the U.S. market.
The broadcast giant has been knocking on the doors of deep-pocketed buyers, including CBS Corp. and Time Warner Inc. So far, Univision hasn’t gotten the nibbles its owners have been looking for.
The reason: Potential buyers are balking at a $20 billion price tag for a company weighed down by $9 billion in debt.
Analysts point out that Univision could be a big catch for a company looking to expand in Spanish-language media. Univision boasts two broadcast TV networks, including the nation’s fifth-largest that draws more than 3 million viewers each night. It also owns more than 60 television stations, eight cable channels and a chain of popular radio stations.
“It is a unique set of assets reaching a huge target market: the Hispanic audience,” said David Joyce, a managing director and media analyst at International Strategy & Investment. “Univision has highly desirable content assets in a world of distribution consolidation.”
Univision’s owners are banking on the growing importance of Latinos in the U.S. and a flurry of deal-making this year.
The problem has been that Saban and his partners paid top dollar – $13.7 billion – 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 – including Saban Capital Group, Texas Pacific Group, Providence Equity Partners, Madison Dearborn Partners and Thomas H. Lee Partners – 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 people involved in the situation.
“Univision is an extraordinary property – Latinos love their television, and they love their Univision,” said Hector Orci, chairman of the Los Angeles advertising agency Orci. However, “It seems their search for a buyer has more to do with the owners, and their situations, than it does Univision and its future.”
The natural buyer would be Grupo Televisa, the Mexico City entertainment juggernaut, which has a minority stake in Univision. Televisa’s involvement with the company dates to Univision’s formation in 1961. But federal rules that restrict foreign ownership of TV stations, as well as the lofty offer price, would make it difficult for Televisa to swallow Univision whole.
Saban 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. Univision’s Spanish-language broadcasts of World Cup matches are averaging more than 5 million viewers, surpassing the audience that has been watching the coverage in English on ESPN.
The company’s finances also have been improving. Univision has wrangled programming fees from distributors and added cable channels, including sports network Univision Deportes. Last year, revenue increased nearly 8 percent to $2.6 billion.
Saban and his partners also might be looking to get out for another reason: Demographics are shifting.
In the past few years, more Latinos were born in the U.S. than have arrived each year from foreign countries.
U.S.-born Latinos are more likely to speak English and so are less inclined to watch only Spanish-language TV, which could limit Univision’s long-term growth prospects.
Although Univision commands nearly 70 percent of the Spanish-language TV market in prime time, it has been looking over its shoulder. NBCUniversal’s Spanish-language operation, Telemundo, has been making gains and loaded up on sports.
In fact, Telemundo’s cable channel will broadcast the Super Bowl next year. And Telemundo outbid Univision for the rights to the next two World Cup soccer tournaments.