HispanicBusiness

The relations between Mexico's Grupo Televisa S.A.B. and Univision Communications Inc. have been a long on-and-off-again affair. Currently, it is back on after an agreement that has Televisa investing $1.2 billion for the benefit of Univision, receiving among other things a 5-percent ownership share of Univision, and the extension of the two media giants' program license agreement.

Which company ultimately benefits most from this accord and the long-term effects on the future of Spanish-language media would be anyone's guess given the history of these companies. The twists and turns in their romance could well be the perfect plot for a telenovela.

When Patricio Wills was head of development at Telemundo, he reportedly described the structure of a telenovela this way: "A telenovela is all about a couple who wants to kiss and a scriptwriter who stands in their way for 150 episodes."

Televisa and Univision first kissed in 1961 when Telesistema Mexicano, the forerunner of Televisa, created the Spanish International Network (SIN), the forerunner of Univision. In the 50 years since, Televisa and Univision have been together twice and apart twice. Now, they are together for a third time, perhaps only holding hands instead of kissing, following the complex deal completed Dec. 20, 2010.

Complex Equity Investment
In addition to the $1.2 billion in cash and assets that Televisa paid Broadcasting Media Partners, Univision's owner, for a 5-percent ownership share in Univision, Televisa also took on debt equal to 30 percent of Univision's value, and has the option to acquire another 5 percent. The deal included an extension of the program license agreement (PLA) between the two media companies until 2025, unless Televisa decides to sell two-thirds of its initial investment in Univision. Then, the PLA would extend for only seven-and-a-half years. In addition, Televisa sold its 50-percent stake in Televisa's pay TV channels in the United States, to Univision. TuTV had been a joint venture between the two.

The deal makes Univision the distribution outlet in the United States not only for Televisa's hugely popular telenovelas but also for Televisa's digital content. Univision already dominates the U.S. Spanish-language media industry, but for online items, the competition is much tighter, according to www.Quantcast.com data. Univision ranks No. 1 with 1.5 million monthly users, but is only 400,000 ahead of No. 2 www.Terra.com with 1.1 million users.

Univision Chief Executive Officer Joe Uva believes the deal to be very beneficial. "We are very pleased to have completed this value-creating transaction, which will significantly enhance Univision's world-class multiplatform offering for viewers and clients while considerably strengthening the company's balance sheet."

Univision's balance sheet has been buffeted by debt that stretches back to 2007, when Broadcasting Media Partners, a consortium of investment groups led by Haim Saban's Saban Capital Group, acquired Univision for $13.7 billion. It was another one of those telenovela moments when the writer keeps the couple from kissing because, on the losing end of the leveraged buyout of Univision, was a group that included Televisa.

Miller Tabak & Co. analyst David C. Joyce was quoted as saying in December 2010: "The new equity investment will help them refinance the debt and get lower rates: The interest rate environment is lower than when they took Univision private. In the end, Univision saves money on the balance sheet by saving in interest expense."