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Rival congloms root for same team

Spain's Mediapro, Prisa kicking around merger

MADRID — It could well be Spain’s biggest deal of the year — if it goes through.

On June 5, Mediapro and Prisa, Spain’s biggest media conglom, ended their two-year soccer war and started merger talks.

Mediapro guaranteed Prisa’s satcaster Digital Plus three seasons of Spanish league soccer, starting late August. Prisa promised to withdraw litigation against Mediapro for allegedly purloining its soccer rights.

Then Mediapro’s parent Imagina began negotiating a marriage with Prisa’s TV’s arm Sogecable.

If this new giant comes into existence, it would boast Spain’s biggest soccer-rights holder and leading film producers (Mediapro), its largest TV drama production powerhouse (Mediapro sister company, Globomedia), its dominant pay TV operator (Digital Plus), Prisa’s Media Capital (which owns top Portuguese web TVI), and, crucially, two of Spain’s commercial broadcasters, Prisa’s Cuatro and Imagina-controlled La Sexta.

On July 24, Prisa and Imagina announced a second extension to merger talks.

Some analysts see significant benefits to the merger.

“Though they’ll remain separate channels, Cuatro and La Sexta would have greater joint bargaining power for U.S. series and with advertisers,” one analyst says.

The new partners might seek larger liquidity “bringing a third party into the merged company’s shareholding or floating part of the company’s shares,” says Luis Padron, at analyst BNPP Fortis.

But talks have stumbled over control of Digital Plus. Prisa, with debts of E5 billion ($7.1 billion), wants a controlling stake; Imagina, which has far less debt but makes far less profit than Sogecable, wants a 50/50 split and right to a veto.

Juan Luis Cebrian, who’s steered Prisa’s fortunes since it launched newspaper El Pais in 1976, and Jose Miguel Contreras, once a cub reporter at El Pais, were all smiles when they announced the potential Imagina-Sogecable merger.

But rather than a marriage made in corporate heaven, the fusion has the makings of a shotgun wedding.

Mediapro is hardly flush with cash, having reportedly made commitments to soccer clubs of $850.6 million for next season’s games.

This May Prisa won a one-year extension on a $2.8 billion bridge loan, led in late 2007 by HSBC Holdings, on the promise of downsizing debt.

It’s under pressure from creditors to show a bigger upside to its business and slash debt, having failed to sell Digital Plus to Vivendi and Telefonica or a chunk of Media Capital to Portugal Telecom, a deal nixed by the Portuguese government.

“Prisa’s fundamental short-term objective is to sort out its debt, which, via financial costs, is consuming 80% of its cash flow,” Padron says.

Talks could drag on until September “if the investments banks want it that way,” Contreras is quoted as saying by online newspaper El Confidencial.

One thing looks certain. If the Imagina and Sogecable merger goes through, there’ll be further mergers among broadcasters.

If it doesn’t go through, the frustrated partners will find other suitors.

One way or another, consolidation is now the name of the TV game in Spain.

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