Dealwatch: Univision

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Published February 28, 2008 at 3:05 PM

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Nearly eight months after reports of a possible sale of its music business in an effort to trim debt, Univision Communications Inc. will sell its music division to Universal Music Group for what sources told The Deal is just under $150 million. The disposal comes 11 months after the Spanish-language broadcaster was taken private in a messy $13.7 billion deal. Another deal to close out February, Univision agreed to shed four radio stations for $24 million.

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ONE MESSY AUCTION

A Haim Saban-led private equity consortium got the green light from the Federal Communications Commission March 27, 2007, on the Univision buyout, which the parties agreed to in June 2006. The deal's close March 29 came a month after Univision tapped a new man to steer its ship. OMD Worldwide chief executive Joe Uva was plucked in February 2007 to succeed the Spanish-language broadcaster's longtime CEO A. Jerrold Perenchio with the deal's close. The close also wrapped up a messy auction in which the consortium beat out Latin America's leading television producer Grupo Televisa SA.

Shortly after the deal was announced, Televisa filed suit against the new owners. At the heart of its argument was the validity of Televisa's agreement to provide content to Univision. The arrangement doesn't expire until 2017, so it seriously hamstrings any attempts for Televisa to operate in the U.S. market. The trial is scheduled for March 18 in Los Angeles, according to the AP.

While Televisa delivered, with an offer above $35.75 per share, a source told The Deal, the Saban-led consortium -- consisting of Madison Dearborn Partners LLC, Providence Equity Partners Inc., TPG, Thomas H. Lee Partners LP and Saban Capital Group -- agreed to pay $36.25 per share for the leading U.S. Spanish language broadcaster that tried, and failed, to set the terms of its own auction.

Bids first came due for Univision on June 20, 2006, but Televisa missed the deadline, leading Univision to let the deadline lapse for Televisa to regroup and make an offer.

THE DOMINO EFFECT

Things turned sour for Televisa when it was finalizing its offer with its private equity partners. First, Carlyle Group backed out over concerns of paying too high a price, leading Blackstone Group LP and Kohlberg Kravis Roberts & Co. to jump ship the next day, which would have left the Mexican broadcaster, which owns 11% of Los Angeles-based Univision, with support only from Venezuela's Venevision Investments LLC, Bain Capital and Bill Gates' Cascade Investments.

At that point, the only other team to have reportedly submitted a bid is the likely victors -- Madison Dearborn, Providence, TPG and Thomas H. Lee Partners -- that tapped media operator Saban, himself at the helm of Germany's ProSeiben Sat.1, to join their bidding pool. The team originally came forward with an offer reports call close to $11 billion.

Meanwhile, Goldman, Sachs & Co. abandoned its bid for the media group, possibly deterred by the hefty expectant price tag, but also citing a conflict of interest in bidding against Televisa, a company it helped take public, and several of its own private equity clients.

Univision originally said it would hear buyout offers -- but only if they're at least $40 per share -- a floor that valued the company, including its $1.4 billion in debt, around $13.6 billion. The price also reflected a hefty premium to its average share price May 12, 2006, of $35.40.

DIGGING DEEPER

At the time, it seemed the Univision sale could have had further regulatory and political implications as well. The auction of the nation's No.1 Spanish broadcaster, which serves a rapidly growing U.S. consumer base, could have instigated a hard look among Capitol Hill lawmakers as to how to best regulate the Spanish-language media segment, arguably its own market.

Dealwatch executive summary
The Date	The Action
3.18.08	Televisa-Univision trial date.
2.28.08	Univision sells music unit to Universal.
8.01.07	Univision may sell music biz.
3.28.07	Univision buyout gets FCC OK.
2.28.07	Univision to get new CEO.
7.19.06	Televisa files suit in the U.S. to end its content agreement with Univision.
7.05.06	Televisa threatens to nullify its content agreement with Univision.
6.27.06	Moody's downgrades Univision's debt after deal announcement.
6.27.06	Univision agrees to a deal with a private equity consortium five strong.
6.23.06	Televisa reportedly comes forward with a sweeter offer.
6.21.06	With Carlyle out, KKR and Blackstone also walk away from the bidding table, which may send Televisa scrambling.
6.20.06	One private equity consortium reportedly enters a bid near $11 billion for the Spanish-language broadcaster.
5.19.06	Univision sets June 8 deadline and $40 per share bidding floor for its auction.
5.17.06	According to a Reuters report, the Madison Dearborn consortium taps media investor Haim Saban to join its team vying for Univision.
5.16.06	Goldman Sachs walks away from its bid, citing a conflict of interest.
5.15.06	Televisia teams with U.S. private equity firms to make a move for Univision and declares its interest in a regulatory filing.
4.10.06	Equity Broadcasting, backed by Univision among others, goes to Coconut Palm Acquisition for $267.4 million.
3.10.06	A number of newspapers report a team of five private equity investors and Grupo Televisa are vying for the broadcasting giant. Later, two of the five named buyout shops cite gun-jumping and say it is unclear whether Telvisa can or will pursue an offer.
2.09.06	Talk of a Univision sale sparks buzz on Capitol Hill. The news could resurrect a debate over whether Spanish-speaking audiences and advertisers are a market unto themselves and should be protected from concentration.
2.2006	Univision looks to UBS to help weigh its strategic options.
1.13.06	Meanwhile, Latino-focused PE firms are slowly but steadily emerging and investing.
1.02.06	Univision announces completing a $90 million acquisition for two San Francisco- and San Jose-area radio stations from Entravision.
Source: The Deal