Will billionaire Haim Saban find any interested parties for Univision in Sun Valley at this week’s annual private gathering of media moguls? The Hispanic media giant is exploring options, including an outright sale and Saban – a Univision board member whose Saban Capital owns a stake in the company – is expected to be pitching Univision at the annual Allen & Co. event in the posh Idaho resort town.
“Easily the most logical and sensical of the purchasers of Univision would be Disney,” Jimmy Schaeffler of the media consulting firm The Carmel Group, tells The Hollywood Reporter. Univision’s audience “will not only buy your content wares, but will attend your theme parks, especially in Spanish strongholds, such as Florida and Southern California.”
Univision recently relocated its corporate headquarters from New York to Miami, where most of its 4,000 employees work. “Univision By Disney would be a brilliantly strategic move on the part of the folks in Burbank,” Schaeffler says. “No other potential buyer has quite the gravitas combined with quite the need.”
But Walt Disney Co. CEO Bob Iger may not have the financial bandwidth for such a large acquisition. Last year Disney paid $71.3 billion for most of the entertainment properties of 21st Century Fox.
Another possible suitor is Viacom, whose Shari Redstone is also hobnobbing in Sun Valley. Redstone has been pushing for a merger of Viacom and sister company CBS. Adding Univision to the combo “might be just what the doctor ordered,” the Reporter suggests.
Another potential prospect is Fox Corp. CEO Lachlan Murdoch (also in Sun Valley) might fancy Univision’s news and sports assets. And AT&T may want to kick the tires, although like Disney, AT&T is still digesting a megabucks deal – its $85.4 billion purchase of Time Warner.
Univision is looking for a “strategic acquisition,” an insider with knowledge of the process tells the Reporter. “It’s an asset suited for a larger business with scale.” And with none of the likely suitors currently a radio owner, it also raises questions about whether the deal would include the 58-station Univision Radio group.
Did Investors Wait Too Long?
As its financial backers seek to cash out of their $13.7 billion investment, Univision may face hurdles in finding a buyer, according to a prominent analyst. BTIG Research & Strategy’s Rich Greenfield believes the Hispanic broadcaster’s legacy TV business may be a less attractive proposition in a media world where much of the growth is coming from over-the-top streaming video services.
“While the media industry is huddling together to survive winter as consumer behavior shifts, I cannot fathom why anyone wants or needs to buy Univision today,” Greenfield told the Wall Street Journal. “In an increasingly global programming world, Univision faces more competition than ever before with the [subscription video] wars just getting started in 2019.”
Univision’s private-equity investors “simply waited too long and missed their window” to sell, Greenfield said.
Univision is owned by Broadcast Media Partners, a consortium of five private equity firms, including Madison Dearborn Partners, Providence Equity Partners, Saban Capital, TPG Global and Thomas H. Lee Partners. The group paid $13.7 billion for the company in 2007 in one of the last of the highly leveraged buyouts prior to the Great Recession.
For the current owners to break even, Univision's equity needs to be worth around $6.2 billion. Factor in $7.4 billion in debt the company is carrying from the 2007 buyout, and the enterprise would have to be valued at over $13.6 billion, according to Reuters, or roughly what they paid for it. But with $1 billion in 2018 operating income before depreciation and amortization (OIBDA, a measure of cash flow), a potential buyer would have to pay a rich 13.5-times OIBDA.
During the past year, CEO Vince Sadusky has refocused Univision on its core Spanish-language media assets while selling off money-losing English-language properties. Should his overhaul bear fruit, and OIBDA grows 20%, Reuters estimates “the needed valuation multiple would fall to a bit over 11 times.” That puts it in the ballpark of what AT&T paid for Time Warner and Discovery Communications' merger with Scripps Networks. “For private equity folks, breaking even – a rate of return of zero, before fees - is pretty much a failure,” Reuters explains. “In this case, even achieving that will require both management skill and seller's luck.”
Univision said it hired three banks to explore options, including an outright sale or a partnership with another company. The company’s pitch to potential suitors is that the U.S. Hispanic audience represents “one of the very few certain growth opportunities in today’s media marketplace,” and that Univision is well positioned to capitalize on that growth. Its financial backers have been eager to cash out. In 2017, Univision passed on an offer from cable tycoon John Malone that valued the company at between $13.5 billion and $15 billion.