Univision Communications, while not currently involved in a sale process, would like to sell to a strategic media buyer, according to CEO Vincent Sadusky.
The New York-based, Spanish-language television network, which has been private equity-backed since 2007, is long overdue in providing a liquidity event for its investors, he added on the sidelines of The National Association of Broadcasters show in Las Vegas last month.
Sadusky, who served as CFO of Univision’s ‘sole competitor’ Telemundo when it sold to NBCUniversal for USD 1.98bn in 2001, said that experience has informed his belief that a large media buyer would be similarly complementary to Univision. When Telemundo sold to NBC, its ad-buying power increased threefold, as its access to brand accounts rose from less than 500 to nearly 1,500, he noted.
While a sale is in Univision’s eventual plans, a transaction is not imminent and the company is focused on operations, said a source familiar with the company’s strategy. Univision and its private equity sponsors did not provide guidance on deal timing nor a desirable sale price. Discussions of price are ‘premature’, the source noted.
In mid-2017, media reports cited Liberty Media [NASDAQ:FWONA] and Discovery Communications [NASDAQ:DISCA] as potential bidders, willing to pay a roughly USD 13bn price tag, but no deal came to fruition. Three years before, in 2014, Univision was asking for a USD 20bn valuation, according to The Los Angeles Times.
As reported, the gap between Univision’s asking price and the market’s offer has been at the heart of the years-long deal stalemate. Twelve years ago, its financial sponsors purchased the company for USD 13.7bn, so any offer would have to exceed that amount for a return to investors.
Questions about when and how Univision will exit have circled the company for years, Sadusky said, adding that the rumors create internal instability. An IPO was the most likely outcome until recently, but the company pursued, delayed and eventually abandoned its public listing a year ago. On that exit option, however, Sadusky was clear: ‘There are no S-1 forms sitting on my desk,’ he said. In fact, the executive was hired in May 2018, soon after Univision dropped its IPO effort.
An IPO does not make sense in the near-term, a sector advisor said, citing the ‘unexciting’ trade multiples for larger, better-performing media stocks. If CBS [NYSE:CBS] is trading at a forward P/E ratio of under 8x, the advisor reasoned, Univision’s existing investors would need to accept an even lower return in the public markets right now. That would be an unattractive proposition for the investors, unless they’ve ‘thrown in the towel’ on the investment, he added.
Univision is in a ‘tough spot’ that makes any near-term transaction challenging, the sector advisor continued. One of the complicating issues has been the English-language digital assets it acquired in transactions designed to recast Univision as a diversified media company leading up to the failed IPO.
After announcing its intention to divest its noncore, non-Hispanic assets in July 2018, Univision sold off its digital properties, Gizmodo Media and The Onion, to private equity fund Great Hill Partners last month. According to Digiday, Univision sold those assets for USD 50m after spending USD 200m to acquire them in 2016, in effect taking a 75% loss. Morgan Stanley served as sell-side advisor on the transaction.
Outside of its core Hispanic TV business, Univision also owns 58 radio stations, which the source familiar said the company does not plan to divest.
Another persistent issue has been Univision’s debt-saddled balance sheet, which the company has been steadily working to de-lever. According to the company’s published financials and the source familiar, the company paid off approximately USD 550m of debt in 2018, bringing its outstanding balance to USD 7.5bn.
The company’s longstanding, private equity owners are Madison Dearborn Partners, Providence Equity Partners, TPG Capital, Thomas Lee Partners and Saban Capital Group, collectively known as Broadcast Media Partners.
A 36% stake in equity and warrants is owned by Mexico’s biggest broadcaster, Grupo Televisa, who also licenses content to Univision. That hefty, 16.45% licensing fee, is another thorn in Univision’s side, the sector advisor said. Televisa pulled USD 366m in cash out of the business last year, he added.
There are no changes planned to the program licensing agreement with Televisa, the source familiar said. Univision and Televisa had a joint head of content, Isaac Lee, who stepped down in July 2018. The two companies have separate content leads now, the source added.
The US Federal Communications Commission ruled in 2017 that Televisa could own up to 49% of Univision, an option it has not yet fully exercised.
In 2018, Univision reported USD 2.7bn in revenue, a 7% decrease over the previous year. The company’s operating income was nearly halved to USD 611m, primarily due to impairment losses and restructuring, severance and related charges. Univision took a USD 150m loss from discontinued operations last year, leaving it with just USD 800,000 in net income.
Televisa, Madison Dearborn Partners, Providence Equity Partners, TPG Capital and Thomas Lee Partners declined to comment. Saban Capital did not respond to a request for comment.
by Reyhaneh Fathieh in Los Angeles and Jonathan Guilford in New York