When it comes to finding a buyer for Los Angeles-based Univision Communications Inc., all roads lead south of the border.
Mexico's media colossus, Grupo Televisa, has long been looking for a way to increase its 10.8% stake in Univision, the dominant Spanish-language media company in the U.S. In February, when Los Angeles billionaire A. Jerrold Perenchio put the company that he has tightly controlled for 14 years on the block, Televisa got ready to pounce.
Mexico's largest broadcaster is working with investment banking firm Allen & Co. to structure a bid, according to two sources involved in the process. At the same time, several private equity firms have been wooing Televisa to join with them in their bids.
The reason: Under a long-term programming agreement, Televisa produces Univision's most profitable shows, the wildly popular \o7telenovelas. \f7When that exclusive arrangement expires at the end of 2017, whoever owns Univision (analysts say it could fetch as much as $14 billion today) will need to have Televisa -- and its hit-making machinery -- on its side.
"It doesn't make sense to buy Univision without Televisa," said Luis J. Echarte, chairman of Azteca America, a U.S. Spanish-language television network owned by TV Azteca, Mexico's second-largest broadcaster. "That would be too big of a risk for the amount of money at stake."
If he can pull off a deal for Univision, Televisa's 38-year-old chairman, Emilio Azcarraga Jean, will achieve a lifelong goal: returning to his family the company that his grandfather founded in 1961 and his father was forced to sell a decade ago. It also would give Azcarraga Jean a much bigger slice of the growing Spanish-language advertising pie in the U.S.
Azcarraga Jean faces a significant obstacle: Televisa cannot buy Univision outright. Federal rules bar foreign companies from holding more than 25% of a U.S. broadcasting company.
Investors, however, say there are ways to structure a deal so that the station group and television networks are considered separate entities. Under such a scenario, Televisa could give up control of Univision's 62 television stations while keeping control of its two broadcast networks, cable channel, music division and Internet properties.
In Mexico, Televisa boasts four television networks of its own, as well as cable channels, hundreds of TV and radio stations, satellite television, a feature film production unit and a publishing arm that distributes more than 80 magazines. It also owns three soccer teams, Mexico City's Azteca Stadium, a discount airline and off-track betting parlors.
