Mexico's Televisa to take 5% stake in Univision

Invests $1.2 billion; expands program deal

NEW YORK - Mexican broadcaster Grupo Televisa has agreed to take a 5% stake in U.S. Spanish-language media company Univision Communications, which it can grow in the future, and to extend and expand the companies' long-term program license agreement.

The new program license agreement will now include Internet and mobile rights and cover key Mexican soccer rights. It will run through at least 2020, but more likely 2025 or later, compared with the previous deal's 2017 expiration. Televisa will get additional license fee payments estimated at close to $50 million in the first year. 

Under the terms of a binding agreement unveiled Tuesday, Televisa will invest $1.2 billion in Univision and contribute its 50% interest in the two firm's cable network programming jont venture TuTV in return for a 5% stake plus debentures convertible into an additional 30% stake of Univision in the future. The company is paying $130 million for the initial 5% stake, but the deal also gives Televisa the option to acquire an additional 5% stake in Univision in about five years.

The investment is unusual in that it includes both an equity and debt portion.
Under U.S. media ownership rules, a foreign company can not own more than 25% in a U.S. broadcaster.

Three Televisa representatives will join the board of Univision, which will gain more financial flexibility amid a high debt load and strengthen its relationship with a key program supplier.

For Televisa, the move means a stronger presence in the fast-growing U.S. Hispanic media market and a way to benefit from what the company said it expects will be continued growth here. Televisa has been looking to grow outside its home market and recently unveiled a deal with Lionsgate to distribute movies for Spanish-language audiences in the U.S.

The deal marks a new era in the relationship between the two Spanish-language media powerhouses. Televisa in the past tried to acquire Univision, but the company ended up being taken private by the current owner group led by Haim Saban's Saban Capital Group and private equity firms Madison Dearborn Partners, Providence Equity Partners, Thomas H. Lee Partners and TPG Capital. And just years ago, the two were embroiled in never-ending legal battles over program rights.

Televisa president and CEO Emilio Azcarraga Jean called the deal between the two companies "a highly attractive strategic platform for the continued distribution of our content in the U.S. marketplace, our most important media marketplace outside of Mexico."

Univision chairman Saban said the agreement "fully aligns the interests of Univision and Televisa for the long-term as both companies work to further serve the substantial growth opportunities in Spanish-language media in the United States."

The companies expect the deal to close during the first half of 2011.

Among key rights covered by the new program deal extension and expansion:
- Univision receives the U.S. rights to broadcast Mexican soccer games that Televisa has rights for starting with select teams in 2011
- Univision gets exclusive Spanish-language broadcast and digital rights to Televisa audiovisual programming in the U.S.
- TuTV, which broadcasts some of Televisa's pay TV channels, will be fully owned by Univision, which pays Televisa $55 million.