Azteca courts Canal 40

Net hopes to buy 51% option in privately held channel

MEXICO CITY — Just days after rejecting a $40 million bid for its option to a majority stake in Canal 40, TV Azteca is returning to a Paris court to demand that the option be exercised.

In 1998, Azteca signed a strategic shared production and advertising deal with privately held Canal 40, which, among other things, entitled Azteca to a 51% share in the Mexico City station should the contract be broken. In 2001, Canal 40 claimed that Azteca was not holding up its end of the contract and broke off relations, and revenue sharing, with the net.

Azteca appealed to the Intl. Court of Arbitration, in Paris, which acts as a dispute mediator. In December 2002 the court ruled in favor of Azteca, claiming the contract was still valid. The decision led to Azteca’s forceful seizure of the Canal 40 transmitter for nearly a month.

Now Azteca is returning to the same court, asking it to enforce the net’s right to the 51% option, which it says it hopes to buy. Azteca, Mexico’s second-largest net, has two broadcast channels, compared to four for rival Televisa.

Last week, Mexican businessman Isaac Saba, who is attempting to purchase the debt-ridden Canal 40 from current owner Javier Moreno Valle, made the $40 million offer to Azteca. Net rejected the offer.

In order to purchase the channel, Saba, who currently owns a small stake in Canal 40, must liquidate the considerable debt it has accumulated and agree upon a fair price with the current owner. That price, according to local accounts, has fluctuated between $75 million and $100 million, including debt.

In addition, Moreno Valle has been reluctant to relinquish control of programming for the channel. The chief obstacle to the purchase, however, has been the ongoing Azteca dispute.

Since the original Paris ruling, lawyers for Canal 40 have been attempting to nullify the judgment, a motion which is still in process.

Resolution of the situation has been made even more complex by various Canal 40 debtors who are asking for small stakes in the channel in exchange for their debt. Several have filed complaints to Mexico City courts.

Saba, one of Mexico’s richest businessmen, has been attempting to negotiate the purchase of Canal 40 since late summer. Meanwhile, Canal 40’s debt problems have grown so severe that it has ceased paying many of its employees.

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