June 28, 2006 Univision Jilts Televisa for Rival Bid By ANDREW ROSS SORKIN NY Times
http://www.nytimes.com/2006/06/28/business/media/28univision.html?pagewanted=print It is a plot from a telenovela that might be seen on Univision: A months-long courtship with a surprise twist and a jilted groom, hinting at revenge. That was the scene yesterday after a consortium of private equity firms won an auction for Univision Communications, the largest Spanish-language media company in the United States, with a $12.3 billion bid, prompting the rival suitor, Grupo Televisa, to contend it had been deliberately shunned in favor of a lesser bid. "Notwithstanding our repeated offers to discuss all aspects of our proposal including price, Univision and its advisers refused to enter into any discussions with us after we submitted our initial bid," Televisa said. "Given this action by Univision's board, Televisa has a number of alternatives it is considering." What Televisa will do next is unclear, but inside the company the anger is boiling. Televisa, the Mexican media giant that provides most of Univision's most popular programming, has had a decade-long public feud with Univision's chairman, A. Jerrold Perenchio. Among the possible steps Televisa discussed yesterday was suing Univision, arguing that the board breached its fiduciary duty to shareholders by not engaging in further negotiations. Televisa is also considering a new offer for Univision, though it would have to pay a $300 million breakup fee and beat the private equity consortium's offer significantly to pay for the risk that the deal could be blocked or delayed by regulators. Altogether, analysts said, the Televisa-led group would probably have to pay at least $38 a share, which would be $1.75 higher than the consortium offer. Univision declined to comment yesterday on Televisa's contentions. Shares of Univision rose more than 6 percent yesterday, to $34. The consortium that won the auction Madison Dearborn Partners, Providence Equity Partners, the Texas Pacific Group, Thomas H. Lee Partners and the media investor Haim Saban made a sneak attack over the weekend with a sweetened offer of $36.25 a share after learning that the Televisa-led group had bid $35.75 a share, an offer that was much lower than expected. The new offer by the private equity group followed the rejection of its initial bid of $35.50 a share. At a board meeting late Monday night in Los Angeles, Univision's board accepted the private equity group's offer over the objections and surprise of two board members who represented Televisa, which owns about 10 percent of Univision, and Venevision of Venezuela, which had loosely associated itself with Televisa's bid but ultimately decided against joining the final bid. The Televisa-led group, which included Bill Gates's private equity firm, Cascade Investments, and Bain Capital, was stunned to learn that it was not given a chance to raise its offer, people involved in the group said. Televisa sent Univision a letter over the weekend and again during the board meeting asking to negotiate on both terms and price, these people said, but the letter was never answered. One person close to Televisa said the group would have been willing to pay as much as $38 a share, though that suggestion may be far-fetched: the group had already lost four of its backers the Carlyle Group, the Blackstone Group, Kohlberg Kravis Roberts and Venevision because of worries about overpaying. People close to Univision suggested that they could not take Televisa seriously after it bid only $35.75. And once the private equity group bid $36.25, Univision was skeptical that Televisa would beat that offer by at least $1, an amount that advisers to Univision suggested would be the premium needed to pay for the regulatory risk. Univision was also up against a threat from the private equity consortium that if Univision did not take its offer it would walk away, these people said. That left Univision with the choice of taking the bid on the table or waiting for Televisa, which had already missed the company's original deadline to bid and appeared uninterested in taking aggressive action. Televisa also considered joining the winning consortium, which included a provision within its offer to allow Televisa to own as much as 19.9 percent of the company. But Televisa resoundingly decided against it yesterday, a spokesman, Robert Siegfried, said. "It is suicidal that the group does not involve Televisa," he said. "But we are not going to bail out the winning consortium." The friction between Univision and Televisa stems from a deal Mr. Perenchio made with Televisa in 1992 to provide programming for the network through 2017. That deal turned out to be prescient: more than a third of Univision's revenue comes from advertising on Televisa programming. Televisa, however, receives only about 10 percent of that. Televisa has sued Univision over royalty payments and said earlier this year that Univision was in material breach of the 1992 licensing agreement. The winning consortium now faces challenges that Televisa may try to throw in its way. The biggest, perhaps, is Televisa's threat that it may try to broadcast its programming in the United States over the Internet. It is unclear whether Televisa can do that under its agreement with Univision, and it is also unclear how big a dent that would make in Univision's audience, given that broadband has not yet achieved a significant scale in the Spanish-language market. ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Internet: antunes at uh dot edu University of Houston Houston, TX 77204-3011 Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
