Portugal’s TVI in Prisa prism

Spain's key media conglom pacts with bordering pals

LISBON — Portugal and Spain are celebrated for sharing a common border and a mutual indifference. That may now be changing, including in film and TV.

On July 22, Spain’s biggest media company, Prisa, announced a pioneering agreement that would see Prisa buying 46% of Media Capital, which owns Portugal’s top-rated commercial broadcaster, TVI. Deal was made with MC’s controlling shareholders, Miguel Pais do Amoral and Nicolas Berggruen.

Prisa will pay between roughly x265 million ($319 million) plus give Pais do Amoral and Berggruen a 24% stake in Prisa Intl., its burgeoning overseas media division.

Agreement isn’t a done deal. To trigger it, Pais do Amoral and Berggruen must exercise put options on their MC stakes.

Most analysts see the agreement going through: It makes sense for both partners inside and outside Portugal.

Prisa is catching MC and Portugal on an upswing. The country is still plagued by chronic political instability, and as a small economy highly dependent on tourism, services and cheap labor, it has suffered from the enlargement of the EU and strong competition from Spain. But Portugal may be turning an economic corner.

TV advertising, which slumped from 2001-04, is growing. With a major commitment to game and reality shows such as “Big Brother,” plus tabloid news and titillating homegrown soaps, TVI leads primetime with a first-half 35.8% share.

An MC share issue in 2004 slashed debt from nearly $266 million to about $154 million. (MC recorded losses during the previous four years.) BCP Millennium’s Pedro Mendes forecasts a $22 million net profit in 2005.

Prisa has cash, posting $87.7 million in first-half profit. Per Morgan Stanley’s Javier Marin, it could debt-finance the deal without diluting share value.

Prisa management foresees important synergies from MC in radio, TV and content production. The Spanish conglom is the managing shareholder of pay TV giant Sogecable, and aims to launch a free-to-air broadcaster this year.

Edging into the black, Media Capital wants to expand, Pais do Amoral says.

“Portugal needs capital. We must attract foreign capital, and it’s much easier to attract the Spanish than the Chinese,” he says.

TVI harbors desires to launch niche TV channels in Portugal. But the partnership may not stop at Portugal and Spain. Prisa has made no secret of its desire to establish a radio network over the whole of the Spanish and Portuguese-speaking world.

It already has a successful joint radio venture with Televisa called Radiopolis. MC’s high-flying flagship Radio Comercial could act as a springboard into Brazil.

And then there’s the Hispanic U.S., a market both sides are familiar with.

Berggruen is president of Alpha Investment Management a $2.6 billion investment management and private equity firm in New York. In the U.S., Prisa has book-publishing interests, an AM radio station and film/TV production company Plural in Miami. Bulwarked by Media Capital, those beachheads could well expand.