(Bloomberg) — Grupo Televisa SAB soared as much as 37% after agreeing to sell its content and media assets to U.S. partner Univision Holdings Inc. in a $4.8 billion deal that deepens the ties between the two giants of Spanish-language TV.
Televisa, Mexico’s top broadcaster, will remain the largest shareholder in the new Televisa-Univision, with an equity stake of about 45%, according to a statement Tuesday. Under the terms of the agreement, Televisa will receive $3 billion in cash and $1.5 billion in Univision stock.
The sale places a 17% premium on Televisa’s content assets, according to Actinver analyst Rafael Leon, who raised his rating on the shares to the equivalent of buy from a neutral recommendation. Televisa climbed as high as $13.85 in New York trading.
Teaming up with Televisa will help bolster Univision’s push into streaming. Though Univision is the largest provider of Spanish-language TV and radio content in the U.S., it hasn’t become as big a force online. Less than 10% of the Spanish-speaking population currently uses a streaming service, compared with 70% in the English-speaking market.
“We’ll have an unmatched reach across Spanish-language consumers around the world,” Alfonso de Angoitia, Televisa’s co-chief executive officer, said on a call Wednesday. “This represents a tremendous market opportunity to accelerate growth, build on our leadership position in the U.S. and Mexico, and expand our global reach like no media or streaming company has ever done.”
Finance Partners
The deal will be financed through $1 billion of Series C preferred equity investment led by SoftBank Latin American Fund — with participation by Alphabet Inc.’s Google and the Raine Group — plus $2.1 billion of debt commitments arranged by JPMorgan Chase & Co.
Bloomberg first reported in March that Televisa and Univision were considering a deal and said last week that SoftBank Group Corp. was in talks to join the transaction.
The transaction is expected to be completed this year, if it gets regulatory approval in the U.S. and Mexico. The boards of both companies have already signed off on the deal.
Univision CEO Wade Davis will lead the combined company, while Televisa’s de Angoitia will become executive chairman of its board. SoftBank’s Marcelo Claure will be vice chairman.
The new entity will be a colossus of Spanish-language programming, drawing on the more than 86,000 hours of content that Televisa produces a year. The business will get four free-to-air channels from Televisa, as well as 27 pay-TV networks and stations; the Videocine movie studio; the Blim video-on-demand service; and the Televisa trademark.
Digital Trends
Univision, meanwhile, already has its namesake broadcast network in the U.S., plus the UniMás channel, nine Spanish-language cable networks, 61 TV stations and 58 radio stations. It also recently introduced a streaming service called PrendeTV.
“We’re going to help the combined company accelerate the transformation by leveraging the key learnings from the digital trends we’re seeing in other sectors across the world,” Claure said Wednesday, adding Google will be a key partner in this technological transition.
Televisa and Univision have a long history that goes back to 1961, when the Azcarraga family bought the first Spanish-only TV outlet in the U.S. Univision Holdings Inc. was formed in 1987, owned by Televisa and Hallmark. After subsequent ownership changes, Televisa and Univision forged a truce in 2010 after years of acrimony, striking a deal to share programming. Televisa bought a 5% equity stake and debt that could be converted into an additional 30% holding. It paid about $1.2 billion.
Since then, both companies have struggled to keep up with the streaming revolution. U.S. media giants such as Netflix Inc., Walt Disney Co. and Amazon.com Inc. have built online-video empires, and they’re increasing making content in non-English tongues, including Spanish.
But Televisa remains a dominant force in Spanish-language broadcasting. It exports programming not only to the U.S. but to much of Latin America and even Russia and China.
“Televisa-Univision will emerge as the leading global Spanish-language multimedia company, uniquely positioned to capture the significant market opportunity for Spanish speakers worldwide,” Davis said.
Televisa will keep its telecom and cable operations through its Izzi and Sky businesses, as well as the main real estate where productions are carried out, broadcasting licenses and transmission infrastructure in Mexico.
News content production for Mexico will be outsourced via a company owned by Televisa’s owners, according to the statement.
Televisa will use the proceeds from the deal to pay down debt and looks to push its debt-leverage ratio down below 2.0 times. After the transaction, Televisa will no longer consolidate financials of its content segment.
Televisa will focus on expanding its broadband and telecom businesses in Mexico, de Angoitia said Wednesday.
(Updates with comments from conference call starting in fifth paragraph.)
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