Univision slows Telemundo

Spanish b'caster battles Sony-Liberty acquisition

NEW YORK — Spanish-lingo broadcaster Univision Communications Inc. has filed a challenge with the Federal Communications Commission against the proposed $539 million acquisition of its rival, Telemundo Group, by a consortium of Sony Pictures Entertainment, Liberty Media and two investment firms.

Univision, which has 85% of the primetime Spanish-lingo audience share compared with Telemundo’s 15%, cited foreign ownership questions and TV-cable cross-ownership limits in its petition against the application for transfer of Telemundo’s TV station licenses to the consortium, an FCC spokesman confirmed Wednesday. Univision declined comment.

As a foreign company, Sony is limited to 25% ownership in TV stations and as a result, it proposed to take a stake of just under 25% in Telemundo’s eight stations (but 50% in the Telemundo network). Liberty, as an affiliate of cabler Tele-Communications Inc., is restricted by cross-ownership laws to 5% voting stake, although it also has 50% of the network.

These voting interests have already been reshuffled slightly, however, although the companies involved deny the changes were in response to Univision’s challenge.

Both Sony and Liberty have reduced their voting interests in recent weeks, however, although they insist the changes were not in response to Univision’s challenge.

Sony’s voting interest was cut by 1.5 percentage points to about 23.5%, Andrew Kaplan, an exec VP at the Columbia TriStar Television Group said, because the bidding group discovered that foreign investors in one of the investment firms put the original structure just above foreign ownership limits.

Liberty slightly reduced its voting interest as well, sources say. Liberty execs were not available for comment.

As a result of these changes, most observers say the petition has little chance of success.

The challenge is “totally without merit and all it serves to do is slow down the process a bit. It has zero chance (of success),” Telemundo exec VP Don Tringali said.

“Everything raised in their papers has been addressed or is a non-issue,” he added.

“At the end of the day, the slight modifications have no substantive effect on the ultimate deal,” Kaplan said. He noted that there was no challenges to the deal from public-interest groups.

“Its interesting that the only filing against us was from a dominant competitor,” Kaplan said.

Still, the challenge — which was made at the end of a period of public comment in mid-February but has previously gone unreported — has created some uncertainty on Wall Street about the deal, traders say. As a result, Telemundo stock has traded well below the offer price, closing Wednesday down 25¢ to $41.37.

That compares with the $44-a-share offer made by the consortium that was accepted by Telemundo’s board earlier this year after an auction of the company conducted by Lazard Freres.

Timing of the deal’s completion is an issue for the price, because the bidding group promised to increase their price by 8% if the FCC doesn’t approve the deal by August. Kaplan said he still expected the deal to be approved by the summer.

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