Televisa Bags Univision Bargain

Televisa is investing $1.2bn in Univision, the US Spanish language broadcaster, in a deal that implies an equity valuation for the company of around $2.3bn, according to Enrique Senior, MD at Allen & Co, which advised Televisa. The market rewarded the move, sending the stock up 13.75% yesterday. The deal values the equity significantly less than 4 years ago, when Univision was acquired by a consortium of investors for $12.3bn in a deal that valued the company’s equity at around $4bn, according to Senior. “No one feels good about selling below cost,” Senior tells LatinFinance. “But valuations change.” In addition to a secular decline in media valuations since the last Univision deal, the broadcaster has, alongside its competitors, seen advertising revenues plateau. “It’s a great deal for Televisa and you can see that in the stock,” says a senior Mexico-based banker not on the transaction. Televisa, whose $12bn bid failed to attract Univision’s attention in 2006, now gets 5% of Univision in exchange for cash and a 50% stake in a JV valued at a combined $130m. Televisa will also buy convertible debt worth an additional 30%, and an option to acquire a further 5% stake in the future, though terms of the debt investment are not disclosed. The deal could result in Televisa owning 40% of Univision by 2025. As part of the agreement, Univision is increasing royalty payments for Televisa programming, from an existing 9.36% of television revenue, excluding certain major soccer events, to 11.91% of substantially all of Univision’s audiovisual and interactive revenues through December 2017, at which time royalty payments to Televisa will increase further to 16.22%. Additionally, Televisa will receive an incremental 2% in royalty payments on any Univision audiovisual revenues above the 2009 revenue base of $1.6 billion. “Assuming applicable Univision revenue of $2.7bn in 2017, we believe that Televisa would receive approximately $450mn in royalties from the new arrangement in 2017