The Univision – Televisa Deal – a marriage made in heaven.

The equity investment and extension of the Programming License Agreement (“PLA”) by Televisa in and for Univision reflects a number of major market, strategic and credit opportunities for both companies, as well as its stockholders, creditors and financial sponsors.

The announced Televisa – Univision partnership has the following major implications and reflects a set of unique confluences of events.
Televisa, through its investment in a proven, multi-media platform, with the defensive franchise value of owning three traditional networks (two free to air and one cable) and the largest US Spanish language radio group and new media destination, has by and large transferred its dominance of the Mexico market to the lucrative and growing US Hispanic market and has done so at a very attractive investment price point.

Univision and Televisa as now true partners will be able to further solidify their choke hold of US Hispanic viewers and users with an almost impossible to beat combination which has the strengthened ability to maximize the benefits of at least 10 substantive factors:

1. A proven and highly effective content pipeline.

2. Producing additional content in Mexico, the US or anywhere at very efficient margins.

3. Expanding content distribution through a long pending business agreement for new media rights.

4. Expanding mobile media distribution through existing carriers.

5. Significant leverage on satellite and cable distributors for carriage and retransmission revenues.

6. Significant leverage on advertisers including being able to now, provide and garner revenues from product integration.

7. Significant political leverage given the importance of the US Hispanic voting block, the weighting of US Hispanic voters in key swing states and the strength of the Congressional Hispanic Caucus.
8. Significant political leverage to affect regulatory changes eventually permitting Televisa ownership rights above present US regulatory limits while taking advantage of a predicted future environment which will welcome foreign capital to inject equity and debt financing into the US media industry, dropping now archaic foreign ownership limits.

9. An aligning of the interest of Univision, Televisa and their creditors leading to an also rational negotiation for the restructuring of Univision’s debt.

10. A media monolith which will achieve even higher audience shares and continue to impact overall markets ratings, develop “360” advertising solutions, have influence on market and audience research positively impacting the credibility and viability of additional advertiser investments in the US Hispanic market.

Traditionally, Televisa has been hesitant to pay dividends and now has cash of $2.6 billion to invest.

Moreover, Televisa now has significant minority or controlling stakes in 3 of the largest wire line CATV operators in Mexico, a 30% stake NIHD and now a 5% stake in Univision with convertible instruments to increase it to 35% and beyond if it chose to buy in the open market, subject to certain US regulatory issues.

So clearly, Televisa is propagating its content into every connectivity device/format available, and not only gain royalty streams, but is also securing equity stakes in those plays where distribution is of special value.

In this deal, the 5% stake purchased by Televisa implies a $2.6 billion equity valuation for Univision, which is a huge discount compared to the $11 billion equity valuation, which the five financial sponsors forked over for Univision and of course prior to taking $10 billion.

While, Univision gets the use of Televisa’s valuable content through 2025, PLA payments by Univision to Televisa rise to $200 million per year from the current $180 million range.

Televisa, seems to have had the upper hand in this negotiation, but Univision is able to now align the interests of the owners, lenders and Televisa to deal with the previous onerous expiration of its PLA with Televisa and the refinance of the $8.8 billion of secured debt that is due in 2014.

Televisa as been able to effectively expand to the US Hispanic market with a combination of assuring strategic dominance, entering the market within applicable US regulatory guidelines and with the unique opportunity to as a strategic further increase equity in a US multi-media company while its partner is a consortium of private equity funds, which by their nature are not married to any deal or industry over the long term.

Further, as deals go, a lot of credit is due here to Televisa and Univision Chairs, Emilio Azcarraga and Haim Saban, as well as to Televisa’s EVP Alfonso de Angoitia for their positive outlook, tenacity and perseverance in turning a problem and a large divide into a real opportunity for their respective companies, stockholders and financial sponsors.

This deal is truly accretive to both sides.

By Julio Rumbaut
President
RUMBAUT & COMPANY
555 N.E. 34th Street
Suite 2701
Miami, FL 33137 – 4060
Voice: 305.868.0000
Fax: 305.571.0433
Mobile: 305.785.7000
E Mail: ju***@*****ut.com
Skype: juliorumbaut
Web: http://www.rumbaut.com/>