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Univision expected to see initial bids this week

/ Source: The Associated Press

In the months since Univision Communications Inc. put itself on the market, the burning question hasn’t been whether anyone would be interested in acquiring the top Spanish-language broadcaster in the U.S., but how much would they be willing to pay.

Univision may find out as early as Tuesday, when at least two investor groups that have been exploring a potential buyout of the Los Angeles-based media conglomerate are expected to submit initial bids.

At stake is control of a media powerhouse that holds the dominant share of U.S. Hispanic television and radio audiences.

Univision operates three television networks — Univision, TeleFutura and Galavision — more than two dozen television stations, a recorded music division, an Internet portal and the largest group of Spanish-language radio stations.

In 2005, Univision posted a profit of $187.2 million, or 54 cents per share, compared with $255.9 million, or 72 cents per share, in 2004. Revenue for the year increased 9 percent to $1.95 billion from $1.79 billion in 2004.

Wall Street expects the company could fetch between $11 billion and $12 billion.

In February, when Univision’s board, led by Chairman and Chief Executive A. Jerrold Perenchio, announced it would explore selling the company, some Wall Street analysts pegged major media companies such as News Corp., Time Warner Inc. and CBS Corp. as potential bidders.

Since then, two groups have emerged as likely bidders.

One consists of two of Univision’s largest shareholders and programming suppliers — Mexican media giant Grupo Televisa SA and Venezuelan broadcaster Venevision. They teamed up to explore a bid with five private equity firms: Bain Capital Partners LLC; Blackstone Management Associates V LLC; Carlyle Investment Management LLC; Cascade Investment LLC; and Kohlberg Kravis Roberts & Co. LP.

Both companies need to partner with U.S. investors because foreign companies are barred from owning more than 25 percent of any U.S. media company.

A second investor group has been widely reported to include Los Angeles-based media mogul Haim Saban and private equity firms Madison Dearborn Partners, Thomas H. Lee Partners LP, Providence Equity Partners Inc. and Texas Pacific Group.

The group with Televisa and Venevision is widely regarded as having an edge on rival bidders.

The companies already own sizable slices of Univision — Televisa has an 11 percent stake, while Venevision owns 14 percent — giving their private equity partners more leverage in financing an offer, said David Joyce, an analyst with Miller Tabak & Co. in New York.

“It makes their bid stronger and makes it less likely that there will be any competition from the other set of bidders because all of the strategic investors are on the Televisa side,” Joyce said. “On the other hand, it gives the public equity firms the ability to pay a higher price because they have to fund less.”

Televisa and Venevision, which in 1992 teamed up with Perenchio to acquire Univision from Hallmark Cards Inc., also are parties to a license agreement that provides Univision with a hefty portion of their television programming through 2017.

“Having a strong working relationship with those two firms will be critical to whoever owns Univision,” said Philip Remek, a senior equity analyst with Guzman & Company in Miami.

Still, Remek adds, strictly from a pricing standpoint, he doesn’t see either group having a clear advantage.

“Both have private equity groups with considerable cash,” he said.

Aside from money, the relationship between Perenchio and Televisa Chairman and President Emilio Azcarraga, whose father founded Univision, may play a role in the outcome of a contest over Univision.

Last year, a rift between the two men became pronounced after Televisa accused Univision of breaching the terms of the two companies’ programming license agreement. That litigation is still pending. Azcarraga and Perenchio also clashed over Perenchio’s decision to named Ray Rodriguez as president and chief operating officer.

Several analysts have concluded that while a Univision sale is likely to occur, initial bids will probably start around the $38 per share range, not quite the $40 per share reportedly sought by Perenchio.

Univision shares slipped 30 cents to $35.45 on the New York Stock Exchange Monday morning, near the high end of their 52-week range of $23.52 to $36.67.

“Univision is fully priced as is,” Remek said. “I don’t see anybody going much further than current pricing levels.”