Will Univision Spin Off Assets or Sell as a Whole?

Univision Corporate - H - 2018

"After 10 years, investors are looking for an exit," says one person close to the company. "Private equity doesn’t like to sit on their investments this long."

When Spanish-language media giant Univision Communications took a controlling stake in satirical English-language outlet The Onion two years ago, it signaled the company’s willingness to venture outside of its comfort zone.

After all, diversification into internet businesses could help Univision attract Wall Street interest, and an initial public offering was high on its to-do list.

Fast forward to this week, and Univision has scrapped its IPO, replaced its CFO and announced that CEO Randy Falco, by all accounts very popular with rank-and-file employees, will be leaving by year’s end, about 13 months earlier than previously expected. All of this has observers wondering if Univision will return to its Hispanic TV roots or continue Falco’s expansions into the internet and into English programming, as it has done with its Fusion TV network.

With Univision's current private-equity owners, including the likes of Haim Saban's Saban Capital Group, Providence Equity Partners and Madison Dearborn Partners, having long looked at how to eventually exit their investment, analysts say a sale of the company could be back in focus now.

"Given Univision’s leadership position in the coveted U.S. Spanish-language media market, I believe the company remains a potentially attractive target for more than a handful of potential acquirers in the media industry, and conceivably for other financial buyers as well," Tuna Amobi, analyst at CFRA Research, told THR.

Reportedly, Univision's owners have hired a consulting firm to go through a business review that could lead to cost cuts, including layoffs, before a possible sales process. In a sale, the current owners are expected to look for a price target exceeding $14 billion, which is what they paid to take the company private a decade ago. Univision had been seeking an IPO that would have valued it in the neighborhood of $20 billion.

Billionaire media tycoon John Malone showed an interest in taking a stake in Univision, meeting with chairman Saban last year at the Allen & Co. conference in Sun Valley, Idaho, and Discovery Communications, in which Malone owns a stake, has already kicked the tires on Univision.

“After 10 years, investors are looking for an exit,” says one person close to Univision. “Private equity doesn’t like to sit on their investments this long.”

Another option, though, is to first spin out Fusion Media Group and sell it separately. That entity consists largely of English-language assets like the Fusion TV channel, The Onion, The Root (an online magazine focusing on African-American culture) and Gizmodo Media Group, which is made up of assets that used to form Gawker Media Group.

In the meantime, many of Univision’s 4,000 employees are worried that pink slips are on the way as management seeks to cut costs in order to whip the company into shape so that it could attract multiple bidders.

Univision had fallen on hard times, culminating with NBCUniversal’s Telemundo finishing 2017 as the nation’s top Spanish-language broadcast network in weekday primetime programming in the demographics that matter most to advertisers. But more recently Univision’s various networks have reclaimed a 67 percent share of the Spanish-speaking audience in the U.S.

Univision had also been criticized for its weak streaming-media strategy, but the popularity of its El Chapo series on Netflix led to a deal for five more shows in partnership with the streaming leader, beginning with Tijuana, a Spanish-language drama about reporters trying to unravel details of a murdered politician.

Univision Deportes Network, heavy into soccer, is one of the fastest-growing sports networks in the country, which has helped to make up for the declining popularity of telenovelas that are produced by Televisa, a top Mexican TV company that also holds a 10 percent stake in Univision. Telemundo’s less formulaic telenovelas have been snatching share from Univision’s crop, and some investors grew frustrated with the favored-nation treatment that Televisa was getting while churning out programming that was no longer drawing younger viewers.

“If Univision was still so reliant on telenovelas, it would be in a lot of trouble,” one person close to the company said.

While an IPO for Univision is no longer in the cards under current management, investors hoping to grab a strong media brand on the cheap are already circling, looking to get in before a recovery — most traditional media companies have not participated in Wall Street’s bull run in the past few years.

Univision Network, meanwhile, is quietly racking up some small victories, finishing the February sweeps as the No. 1 Spanish-language network in primetime while its TV news regularly beats local stations in areas with a large Hispanic population, like in Los Angeles and parts of Texas and Florida.