Federal approval Tuesday of the $12.3-billion sale of Univision Communications Inc. to a group of private investors was just the first hurdle for the new owners of the country’s largest Spanish-language media company.
The group, which includes Los Angeles billionaire Haim Saban and four private equity partners, has its biggest challenges ahead: Its members must deal with an enormous debt burden, better tap the advertising market, repair frayed relations with its Mexican programming partner, Grupo Televisa, and simply get along with one another.
“For the new owners, it will be all about getting more ad dollars to come in as quickly as possible to service that debt,” said Manny Gonzalez, managing director of Hill Holliday Hispanic, a Miami-based ad agency that specializes in the Latino market.
Univision’s new owners also will grapple with new technologies that are dramatically altering the media landscape as well as the changing habits of its viewers.
Unlike their parents and grandparents, young Latinos are typically bilingual and are just as comfortable watching television in English as in Spanish.
The Federal Communications Commission on Tuesday approved the sale after Century City-based Univision agreed to a record $24-million fine for violating children’s TV programming requirements. The fine settles complaints dating to 2004 against two dozen Univision TV stations for airing children’s soap operas, known as telenovelas, to comply with a federal educational programming guideline.
“In exchange for their use of the airwaves ... broadcasters are responsible for serving the public, including the children in their audience,” FCC Chairman Kevin J. Martin said in a written statement. “Today’s action reminds all broadcasters of this responsibility and obligation.”
The FCC approved the transfer of Univision’s 147 TV and radio licenses to the new owners. It includes Saban Entertainment Group, Providence Equity Partners, Texas Pacific Group, Thomas H. Lee Partners and Madison Dearborn Partners. Last June, they agreed to pay $36.25 a share for Univision and to assume $1.4 billion in debt, bringing the total value of the deal to $13.7 billion. The transaction is expected to close as early as Thursday. Univision declined to comment.
Univision Chairman A. Jerrold Perenchio, already a Bel-Air billionaire, will make about $1.3 billion from the sale of his 11.5% stake in the company.
Of the partners, Saban is making the smallest investment -- $250 million in cash. But he is expected to have a big voice in the management of Univision. Each of the private equity groups is contributing $914 million in cash. In previous regulatory filings, the group said it would finance up to $10.3 billion in debt. Media observers and analysts say that is an enormous debt burden for a company that brought in $2.2 billion in revenue last year.
The consortium announced last month that advertising executive Joe Uva would take over as Univision’s chief executive, replacing Perenchio. Uva vowed Tuesday that “Univision will remain committed to providing the absolute best in Spanish-language information and entertainment.”
One of Uva’s challenges will be making peace with Televisa, Mexico’s largest broadcaster and provider of the bulk of Univision’s prime-time programming. Televisa executives and Perenchio have had a difficult relationship, with Televisa even suing Univision to terminate its long-term programming arrangement and prevent the broadcaster from streaming its shows on the Internet. Saban and executives with the private equity firms have visited Televisa’s Mexico City headquarters.
Televisa holds nearly 10% of Univision’s existing shares and mounted an unsuccessful bid for the company. Although Televisa declined an invitation last summer to join the consortium, some observers have said that still might happen.
“The new owners need to have a better relationship with Televisa,” said Julio Rumbaut, a Miami-based Hispanic media consultant. “Televisa has been a major contributor to Univision. They provide more than 15 of the 22 hours of prime-time programming, and those are the most-profitable hours.”
Terri McKinzie, media director of Tapestry, the nation’s largest Hispanic media agency, said that Televisa holds the keys to Univision’s digital future. “Young Hispanics are avid users of the Internet, and Univision doesn’t have the digital rights to any of the Televisa programming,” she said. “That’s a problem.”
Univision owns TV and radio stations in major Latino markets across the country, including KMEX Channel 34 in Los Angeles, as well as a leading Spanish-language cable network, Galavision, and recording labels.
Michael J. Copps, one of two Democrats on the five-member FCC, tempered his approval with concerns that the agency had not adequately assessed the Spanish-language market or looked into the implications of privately held firms holding so many broadcasting licenses.
Copps said the FCC should “conduct a thorough review of the consequences for Spanish-speaking Americans of the concentration of power that a massive conglomerate like Univision wields.”
Univision’s dominance and the media holdings of some of the private investors collided with FCC rules.
Providence Equity Partners owns 16% of Freedom Communications Holdings Inc., publisher of the Orange County Register and papers in four other markets, including Fresno-Visalia.
Because the FCC prohibits ownership of newspapers and broadcast stations in the same market, Providence has six months to sell its stake in Freedom Communications or sell the stations in those markets, including KMEX Channel 34.