More twists than a hit telenovela

Low-ball bid throws curve at Univision

The battle for the country’s numero uno Hispanic broadcaster may end up with as many plot twists as one of the network’s telenovelas.

A long-awaited takeover bid for Univision from a consortium led by Mexico’s Televisa not only failed to materialize Wednesday, but could even fall apart. Three of its equity partners got cold feet over price and strategy.

Earlier in the day a defection by the Carlyle Group was rumored to be simply a ploy to help inch the eventual price for Univision below $11 billion. But late in the day two other participants — Blackstone and KKR –also backed out of the bid.

A separate offer for Univision from a rival group led by media mogul Haim Saban did come in under the official deadline wire late Tuesday, at around $35.50 a share.

Word late Wednesday was that Televisa was scrambling to refashion a bid for around $36 a share, perhaps with one or two new partners.

Univision chairman A. Jerrold Perenchio had been hoping for as high as $14 billion. The Saban group’s offer essentially lowered the bar.

So far, the most tangible repercussion of the missing Televisa bid is that Univision shares took a big hit.

Stock of Univision Communications dropped 4.4%, the most in 10 months, after reports early Wednesday about the low-balling. (The overall market was up considerably Wednesday, the Dow, for example, climbing 104 points.)

The stock closed Wednesday at $33.84 on the New York Stock Exchange.

Univision, which officially put itself up for sale in February, had been expected by analysts to fetch between $13 billion and $14 billion. But the winds have shifted, with analysts and sources close to both consortia suggesting the currently healthy revenues and profits at Univision might not be sustainable.

“There’s only a World Cup every four years. It’s fine now for Univision, but what next?” said a source close to the company.

The original deadline for bids had been pushed back to Tuesday several weeks ago.

“I think this was a soft deadline, so it doesn’t really matter if a bid comes in one day or the next, as I think the negotiations could go on for months from here,” said Philip Remek, senior equity analyst at Guzman & Co.

Televisa was said early in the day Wednesday to have let the deadline lapse because of a last-minute pull-out by investment partner the Carlyle Group. But with additional defections from Blackstone and Kohlberg Kravis Roberts, Televisa and its remaining partners (Gustavo Cisneros’ Venevision, Bain Capital and Cascade Investments) must now figure out how they’ll come up with the needed dough to mount a credible bid.

Presuming they do, they’ll also have to figure out how to structure the ownership of Univision so that Televisa and Venevision’s financial share does not exceed the FCC cap of 25% allowed to foreign investors in U.S. networks.

A spokesperson for Televisa in New York Wednesday night confirmed the defections but added, “We are confident we will still make the most attractive bid.” (Televisa exec VP Alfonso de Angotia is in New York with a team of execs structuring the bid.)

Several analysts said that despite the kerfuffle within the Televisa consortium, they expect it to win in the end. They say it’s too much of a headache, and too expensive, for Univision to be at odds with its main program supplier.

Univision’s pact with Televisa for telenovelas, the mainstay of Univision’s primetime lineup, runs through 2017.

The Saban-led group would have to channel so much cash into content production as “an insurance policy” that it might lose the benefit of cost savings and limit its return on its investment, Merrill Lynch’s Jessica Reif Cohen said Wednesday.

If the Saban group tried to resell Univision in five years — the typical horizon for buyout firms — there would be only five to six years remaining on the programming pact, which could have a negative impact on Univision’s valuation.

“What is now potentially a lower floor price opens the door to other possibilities,” said analyst David Joyce of Miller Tabak & Co.

Meanwhile, a source close to the Saban consortium said the group’s offer “fairly valued” the company and that he didn’t expect the bid to be on the table for long.

“There are other interesting properties out there if Univision doesn’t fall to us,” he said.

He added that, unlike the Televisa consortium, which has notable foreign ownership regulatory issues to untangle, “Saban’s equity partners have only minor holdings in radio and TV that can be dealt with easily.”

And at least one financial analyst reached late Wednesday, after the KKR and Blackstone defections, said the Saban offer was beginning to look “more attractive by the minute.”

(The Big Four English-language nets already are frowning about the stakes that Televisa’s equity partners have in VNU, the owner of Nielsen Media Research; rival Hispanic web Telemundo, which is owned by NBC Universal, has lobbyists in D.C. preparing to challenge a Televisa purchase.)

Two of Saban’s partners — Providence and Thomas H. Lee — are involved in the mogul’s other major media investment in Europe, Germany’s ProSieben station group, which has largely thrived under the American ownership. The Saban group also comprises Texas Pacific and Madison Dearborn Partners.

Another source reckoned the Saban group would, as with ProSieben, wring at least some cost savings out of the Univision properties as well as replace the management team.

Despite the contention that a deal won’t wait around, offers could be boosted during the auction — or other bidders could surface.

Initial bidding was clearly impacted by signs that the fastest-growing U.S. network is cooling, and by the current skittishness of debt markets as U.S. interest rates rise.

The 75-year-old Perenchio could still walk away from these initial overtures, or he could choose to sell Univision assets off in pieces. The lower pricetag could also attract strategic buyers like Time Warner or Walt Disney.

Univision would not confirm if a planned board meeting was under way Wednesday or whether it had been postponed.

(Jill Goldsmith in New York and Michael O’Boyle in Mexico City contributed to this report.)

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