U.S. billionaire Haim Saban and four private equity firms made an offer to buy Univision Communications Inc., but shares in the Hispanic broadcaster fell as the entry of rival suitor Televisa remained unclear, sources involved with the deal said on Wednesday.
Shares in Univision, the No. 1 U.S. Spanish-language broadcaster, fell as much as 5 percent on disappointment the potential deal was only valued near $11 billion and concerns about Televisa’s failure to submit a bid by a Tuesday deadline set by Univision for the first round of bids.
The Saban group’s offer for Univision was around $35 per share, a source involved with the deal said. Univision had sought a price closer to $40 per share, which would value the company at more than $12 billion.
“I believe the Televisa group will come up with a bid, but it may take them some time,” said Soleil Research Associates analyst Marla Backer. “It does seem at this point unlikely the bids will exceed or even hit that $40 target.”
Private equity firms Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group, Thomas H. Lee Partners and Saban turned in their bid early Wednesday as the auction deadline passed, a source close to the deal said.
A competing group including Mexican broadcaster Televisa and Venezuelan investor Gustavo Cisneros is still considering a bid after private equity firm Carlyle Group dropped out of the consortium shortly before the bid deadline, a source involved with the group said.
“Televisa and their private equity partners are determining valuation,” the source said. Other members of that group are Bain Capital, Blackstone Group, Kohlberg Kravis Roberts & Co. and Cascade Investments.
Merger arbitrage traders on Wednesday said because the Televisa group faces more regulatory hurdles that will likely slow the deal process, the group may want to place a bid $1 to $2 per share above the Saban team’s offer.
Televisa and Cisneros are already major Univision shareholders and have eyed increasing their position for years.
Televisa also supplies the bulk of soap opera-like novelas and other programs to Univision that have grown its audience to the U.S. television big leagues, ranking it competitively with English-language broadcasters like CBS, ABC, NBC and Fox.
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Investors have expressed concern that a failed Televisa bid would harm its ties with Univision. The two are already embroiled in a legal battle over program royalties, and Televisa has stirred speculation it would consider other U.S. broadcast options, presumably with a second-tier partner.
Univision began exploring a sale in February, drawing interest from the world’s largest media companies seeking an entry into the fast-growing Hispanic advertising market in the United States.
But an expected high price tag and potential regulatory hurdles kept U.S.-based broadcasters out of the running and quickly whittled a Univision deal down to a two-horse race.
U.S. foreign ownership rules prevent Televisa from taking control of Univision. Under current U.S legislation, Televisa could only boost its stake to 25 percent, which is why it has sought partners to take part in the buyout.
Since foreign companies are not allowed to majority-own U.S. broadcast licenses, Televisa would need a partner to achieve its dream of a bigger chunk of the U.S. Hispanic market
People close to the sale process have not ruled out the idea that a deal could be too complicated to carry out due to the media holdings of some prospective bidders.
Televisa and Cisneros could also face regulatory scrutiny over foreign ownership of a U.S. company if they are perceived to take a role in Univision that is too controlling.