Race for Univision May Be Close One

May 22, 2006  •  Post A Comment

The race to buy Univision Communications, the country’s leading Spanish-language broadcaster, is shaping up to be the battle of the multibillionaires.

In one corner of the ring is Microsoft Chairman Bill Gates; in the other, media mogul Haim Saban. Both are wealthy men well known in the entertainment industry. And they are the faces in front of the big bucks vying to claim the Univision prize as a mid-June deadline for offers approaches.

The involvement of Mr. Gates, the world’s richest man, with a net worth of $50 billion, and Mr. Saban, who’s worth around $2.8 billion, highlights what is expected to be a horserace for Univision. With the prospect of tapping into the fast-growing Spanish-language market and taking advantage of Univision’s growth, Wall Street analysts predict Univision’s price could exceed $12 billion, especially given that private-equity firms, awash in cash, are capable of spending big to win Univision.

“Bill Gates may be taking a page from Paul Allen’s book and having some fun” by owning entertainment assets, said Philip Remek, a media analyst with Guzman & Co. in Coral Gables, Fla. (Mr. Allen, who co-founded Microsoft with Mr. Gates, owns a controlling stake in cable company Charter Communications.) “Haim Saban is a longtime media veteran involved in production. Maybe his interest would be to have involvement in content creation.”

Mr. Gates, through his investment company Cascade Investments, is part of a group of private-equity firms that has teamed with Grupo Televisa, Mexico’s leading broadcaster, to consider making a play for Univision. The other investment firms are Bain Capital Partners, Blackstone Group, Carlyle Group and Kohlberg Kravis Roberts & Co.

Meanwhile, Mr. Saban, through his investment firm Saban Capital Partners, has joined forces with a private-equity consortium made up of Texas Pacific Group, Madison Dearborn Partners, Providence Equity Partners and Thomas H. Lee Partners.

A spokeswoman for Mr. Saban refused to comment. A spokesperson for Mr. Gates could not be reached for comment.

Though U.S. media companies were seen as likely contenders for Univision, it seems many of the candidates considered likely to step up are falling back, put off by the price. Mr. Remek also noted that after years of fast-paced growth, Univision is losing some momentum.

“This would not be an accretive acquisition for a big media company, so they have a reason to be wary,” he said.

Who will win remains a toss-up. While the final offer price will likely be a big factor, both the Gates camp and the Saban camp bring advantages that could appeal to Univision management.

Mr. Saban made his fortune in television, bringing Japan’s Power Rangers to the United States before merging his Saban Entertainment with News Corp.’s Fox Kids Network to form the Fox Family Channel. The channel was sold to The Walt Disney Co. in 2001 for more than $5 billion.

Three years ago Mr. Saban teamed with a group of private-equity firms to bring German broadcaster ProSieben out of financial straits. Today, the company, known now as ProSiebenSat.1, is Germany’s leading broadcaster.

Those kinds of turnaround skills could come in handy as Univision looks to maintain its pace of growth in the face of heightened competition from other channels looking to grab a piece of the U.S. Hispanic market.

But it could be the Gates camp that has the slight advantage on paper. Televisa already has an 11 percent stake in Univision, and its chairman, Emilio Azcarraga Jean, has made it clear that he’d snap up Univision in a second were it not for restrictions limiting foreign ownership of a U.S. broadcaster to 25 percent. He is so serious about owning Univision, he reportedly considered becoming a U.S. citizen. He abandoned that quest, however, once it became clear that such a move might affect his ownership of his Mexican assets.

Another advantage for the Gates group: Televisa is a major supplier of television shows to Univision through 2017 and is locked in a legal tussle with Univision over royalty payments for those shows. Analysts expect those issues would go away if Televisa is part of the group that buys the U.S. broadcaster. An owner that did not include Televisa would likely inherit this protracted fight.

“That consortium could work with Univision to renegotiate a new programming license agreement much better with Televisa on board,” Mr. Remek said.