Televisa To Gain From Univision Stock Ownership - Analyst Blog

Mexican pay-TV and broadcasting behemoth, Grupo Televisa S.A.B. TV, is likely to gain significantly from its ownership stake in the U.S. broadcaster Univision Communications Inc. Privately held Univision is the largest Spanish-language broadcaster in the U.S. Televisa presently carries a Zacks Rank #3 (Hold).

Currently, a considerable share of Televisa's income is generated from its U.S. operations, which includes the sale of content, website and cable TV. Televisa allows Univision to access its content and then rebroadcast it on TV and the Internet for a royalty. The U.S. Hispanic TV market is highly lucrative and is growing at a remarkable pace. In the first quarter of 2014, Televisa's royalty from Univision was a record-high $64.8 million, up 13.1% year over year.  

In 2007, Univision was acquired by a consortium led by billionaire Haim Saban for a total consideration of $13.7 billion. Other investors were Madison Dearborn Partners, Providence Equity Partners, TPG and THL Partners.

In early 2012, Televisa effectively purchased 35% stake in Univision for $1.2 billion. As per the agreement, Televisa paid $130 million in cash for a 5% stake and lends convertible debt for the remaining 30% stake. The contract also allowed Televisa the right to buy an additional 5% stake over the next five years, which will increase its potential ownership in Univision to 40%.

Currently, Televisa effectively holds a 38% (after converting debt into equity) stake in Univison. This leaves scope for another 2% stake buy over the next three years. The existing U.S. regulation denies any foreign company to control more than 25% stake in any U.S. broadcaster. However, the Federal Communications Commission has the right to allow exemption for selected cases. 

At present, the owners of Univision are exploring strategic options to sell the company and may also consider an initial public offering IPO in the next year. Univision's owners have held talks with CBS Corp. CBS, Time Warner Inc. TWX and Viacom Inc. VIAB regarding this. However, nothing concrete has emerged so far.

According to industry rumors, management is expecting more than $20 billion from the Univision sale. Consequently, Televisa is positioned to gain significantly from the sale.