Grupo Televisa Poised to Gain on Probable Univision IPO - Analyst Blog
Mexican pay-TV and broadcasting behemoth, Grupo Televisa S.A.B.TV , is likely to gain significantly from its ownership stake in U.S. broadcaster Univision Communications Inc. Privately held Univision is the largest Spanish-language broadcaster in the U.S. According to a recent CNN report, the owners of Univision are seriously considering an initial public offering (IPO) for the company in late 2015.
In 2007, Univision was acquired by a consortium led by billionaire Haim Saban for a total consideration of $13.7 billion. Other investors were Madison Dearborn Partners, Providence Equity Partners, TPG and THL Partners. In early 2012, Televisa effectively purchased a 35% stake in Univision for $1.2 billion.
As per the agreement, Televisa paid $130 million in cash for a 5% stake and purchased convertible debt for the remaining 30% stake. Televisa also holds the right to buy an additional 5% stake over the next five years, which will increase its potential ownership in Univision up to 40%.
Currently, Televisa effectively holds a 38% (8% in equity and 30% in convertible debt) stake in Univision. This leaves scope for another 2% stake buy over the next three years. The existing U.S. regulations bar any foreign company from controlling more than 25% stake in any U.S. broadcaster. However, the Federal Communications Commission has the right to allow exemption for selected cases.
Univision is the fifth largest TV network in the U.S. The company's portfolio consists of two leading Spanish-language broadcast networks, several cable channels, TV stations and a chain of popular Spanish-language radio stations.
Earlier Reuters reported that Univision's IPO could raise $1 billion which will eventually raise the company's value more than $20 billion. Last year, Univision's owners held talks with CBS Corp. CBS , Time Warner Inc. TWX and Viacom Inc. VIAB for the sale of the company; however the initiatives have failed to materialize.
Currently, a considerable share of Televisa's income is generated from its U.S. operations, which includes the sale of content, website and cable TV. Televisa allows Univision to access its content and then rebroadcast it on TV and the Internet for a royalty. In 2014, Televisa's royalty from Univision was a record-high $314 million, up nearly 15% year over year.
The U.S. Hispanic TV market is highly lucrative and is growing at a remarkable pace. Consequently, Televisa is positioned to gain significantly from the sale of Univision. Televisa currently carries a Zacks Rank #4 (Sell).