FCC 375

Over objections from media advocacy groups about the impact on localism and complaints from the Trump campaign about political bias, the Federal Communications Commission has approved the proposed sale of Univision Communications to Searchlight Capital Partners. The sale of three television stations in Puerto Rico will be required in order to comply with cross-ownership limits, but the 58-station radio portfolio will remain intact. “We find that that the record presents no substantial and material question of fact as to whether the transaction serves the public interest,” the FCC’s 14-page order said.

The complex sale is structured as a stock purchase that will see Searchlight Capital buy the equity stakes held by a consortium of private equity firms since 2007. Once the deal closes, Searchlight will hold a 26.2% stake in the company with another 26.1% held by ForgeLight, the investment firm controlled by former Viacom executive Wade Davis who is set to become Univision’s next CEO. Another 11.6% stake will be held by Liberty Global, with the remaining 36.1% controlled by Televisa – the Mexican broadcaster that creates much of the content aired on the Spanish-language television network.

Under the deal’s terms, Searchlight will have the right to appoint four of the nine members of Univision’s board. ForgeLight will get to name two others, one of whom will be Davis, who will also become CEO of Univision. Televisa will have the right to appoint three others. While Liberty Global won’t hold any board seats, it will have the right to what’s known as an “observer’s seat” on the board. In hundreds of pages, the would-be owners of the largest media company targeting Hispanics said the deal will be financed in a series of notes that will come due in 2022, 2023 and 2025.

The FCC has concluded that in all 15 cities where Univision owns both radio and television assets are within the limits, the television duopoly rule means it will need to downsize in Puerto Rico. The buyers have committed to the FCC to sell WLII-DT, WSUR-DT and WOLE-DT in that market in order to come into compliance with local TV ownership rules. Univision already controls top-rated WAPA-TV and WSTE-DT in addition to two FMs and three AMs in Puerto Rico.

The proposed sale brought objections not only from public interest groups such as Free Press, the League of Latin American Voters and the National Hispanic Foundation for the Arts, but also the New York and California Attorneys General. They contended that allowing Univision to become foreign-owned would result in less competition, diversity and localism, contrary to the public interest.

But the FCC rejected those allegations. It instead said the sale would be in the public interest because the new owners have pledged to expand Univision’s digital footprint. The FCC also said the deal’s critics failed to provide evidence of how the transfer would diminish competition, diversity, or localism, or cause any transaction-specific harm.

Foreign Ownership Waiver Granted

As part of the proposed buyout, the FCC also granted the petition filed by Univision’s buyers to exceed the current 25% cap on foreign ownership. “We find that the public interest would not be served by rejecting Univision’s request to permit foreign investors to own up to 100% in the aggregate of Univision’s equity and voting interests,” its order said. The FCC previously gave Mexican broadcaster Televisa permission to hold up to a 49% stake in a 2017 ruling.

The federal government’s Team Telecom cleared the proposed sale in November, concluding it presented no national security or law enforcement issues. Univision’s buyers said in their request that allowing to it be up to 100% foreign-owned has “the potential to spur new and increased opportunities for capitalization for broadcasters.”

The need to go beyond what the FCC has already agreed to is based in part on who controls Searchlight. The private equity firm’s three founding partners are Eric Zinterhofer, a U.S. citizen; Erol Uzumeri, a Canadian citizen; and Oliver Haarmann, a German citizen. And Liberty Global is a privately-held television and telecom company based in the U.K.

Univision had been exploring sale options since mid-2019 after an early attempt by its private equity owner – a consortium that includes Madison Dearborn Partners, Providence Equity Partners, TPG, Thomas H. Lee Partners and Saban Capital Group – was unable to find enough support on Wall Street to take the company public and allow them to begin liquidating their decade-old investment. The group paid $12.3 billion for Univision in 2007.