Univision Strikes Pact With Televisa

Univision Communications Inc. on Thursday solidified its position as the dominant Spanish-language broadcaster in the U.S. by striking an $800-million deal with its Mexican and Venezuelan partners to air exclusive television programming. It also is buying the leading Latin record label, the partners said.

As part of the complicated agreement, Grupo Televisa of Mexico City will increase its holdings in Los Angeles-based Univision to 15%, while Venevision of Caracas, Venezuela, will boost its Univision stake to 19%. Because federal laws restrict foreign ownership of broadcast companies to 25%, much of the deal involves stock warrants, which are not subject to the same Federal Communications Commission rules, the companies said.

Univision now will have sole rights to the world’s most popular Spanish-language programs. The deal puts more pressure on its much smaller Miami-based rival, Telemundo, to find quality programming for the U.S. market. General Electric’s NBC purchased Telemundo in October for $2.7 billion.

“I’d be nervous if I were NBC, after having paid so much money for Telemundo,” said James Marsh, senior broadcast analyst with investment banking firm Robertson Stephens. “It’s never going to be any harder than it is right now to crack into the Spanish-language market.”

The Univision deal is significant, analysts said, because it resolves a yearlong feud between the partners and locks up popular Spanish-language programs for its second U.S. network, Telefutura, that the company will launch next month. Univision can show the popular Televisa novelas , or soap operas, on all three of its networks, including its cable network Galavision. Previously, Televisa allowed its shows only on Univision’s flagship broadcast network.

The deal signals Wall Street that Univision’s 70-year-old chairman, A. Jerrold Perenchio, isn’t positioning the company for sale to a larger media conglomerate, such as Viacom. However, the deal gives Univision added flexibility by removing provisions that would have allowed Televisa and Venevision to block a potential sale.

“They have indicated that they are not selling the company,” said Alfonso de Angoitia Noriega, Televisa’s chief financial officer who helped negotiate the deal during two weeks of marathon sessions in New York.

“This is a great deal because it aligns the interests of Televisa and Univision,” de Angoitia said. “They get to use our programming ... and we get a larger ownership stake. We can share in the growth of the U.S. Hispanic market with Univision.”

Televisa agreed to pay Univision $375 million to boost its equity stake, and analysts said Univision will use the money to pay down some of its nearly $1 billion in debt from purchasing 13 stations to form its second network.

Televisa’s chairman and chief executive, Emilio Azcarraga Jean, also will become Univision’s vice chairman.

“Televisa gets more revenue sharing, more strategic say in the company and a seat on the board,” said David Joyce, broadcast analyst with Miami investment banking firm Guzman & Co. “Televisa has wanted to get more involved in the U.S.”

Univision and Televisa already had a programming deal through 2017. The changes dramatically broaden the number of channels and fees Televisa will collect.

Speculation in the industry was that NBC would try to work a deal with Televisa for some of its programming and take advantage of worsening relations between Univision and Televisa. “The NBC-Telemundo deal helped put [Univision and Televisa] back together,” Joyce said.

Univision agreed to pay Televisa an additional 3% fee for programs shown on Univision’s flagship network and its cable channel, Galavision, plus a 12% fee for programs on the new network, Telefutura.

In addition, Univision and Televisa agreed to create a joint venture to introduce Televisa’s satellite and pay-TV programming in the U.S. Televisa has five specialty channels, two devoted to movies and three to music videos.

Univision also will dramatically boost its role in the Spanish-language music business by paying $240 million in stock for Televisa’s Los Angeles-based label, Fonovisa. Univision plans to merge Fonovisa, which has more than 120 artists, with Disa records, the No. 2 label in the same market. Univision bought 50% of Disa in April.

Univision’s stock fell $1.98 Thursday to close at $37.92 on the New York Stock Exchange.