* Shares end up more than 12 percent on NYSE, Mexico
* Televisa deal subject to Univision debt restructure
* Televisa royalties seen increasing
(Adds details on Univision debt, comment, closing quotes)
By Cyntia Barrera Diaz
MEXICO CITY, Oct 5 Televisa, the soap opera
powerhouse that is Mexico's top media company, is raising its
bet on the fast-growing U.S. Hispanic market by investing $1.2
billion in debt-laden broadcaster Univision.
The investment gives Televisa an initial stake of 5 percent
in Univision Communications Inc that could grow to as much as
40 percent eventually.
It also is a big step in repairing a relationship between
partners that was damaged in recent years by royalty payment
disputes and management fights.
The news of the investment in privately held Univision by
Televisa (TV.N) (TLVACPO.MX) pushed up the Mexican company's
stock by over 12 percent.
"It is a game-changing event for both Televisa and
Univision, not only for the growth potential of the U.S.
Hispanic market ... but for the potential across all (media)
platforms," Televisa Executive Vice President Alfonso de
Angoitia told Reuters.
The deal initially would give Televisa (TLVACPO.MX) a 5
percent stake in Univision plus a 30 percent equity stake from
convertible debentures in the U.S. broadcaster when they mature
in 15 years. The Mexican company will have an option to buy
another 5 percent of Univision in three years.
U.S. law prohibits foreign broadcasters from owning over 25
percent of U.S. broadcasters. Televisa said it did not know how
it would overcome that at present, but De Angoitia said he
hoped that law would change eventually. He declined to comment
further on that issue.
The agreement makes Televisa the main provider of
programming that Univision broadcasts across the United States
through 2020, adding three years to the previous deal as
Televisa also seeks to reach U.S. Spanish speakers with its
Internet and mobile phone content.
The deal gives Televisa better prices for its programs and
solidifies Univision's position atop the U.S. Spanish-language
market, leaving NBC's Telemundo (GE.N) a distant second.
Univision says it draws nearly 6 percent of primetime
American viewers aged 18 to 49 as the Hispanic television
"This is a very good deal (for Televisa) as it repositions
it in the U.S. market," said Martin Lara, an analyst with Itau
Securities. "Plus, it gets higher royalties."
(For a graphic on the U.S. Hispanic television market,
click on link.reuters.com/tuf96p)
For a breakingviews story, see [ID:nN05273946]
The deal marks a comeback for Televisa, which sold its 11
percent stake in Univision after losing the battle for
ownership to a group led by Egypt-born entrepreneur Haim Saban,
which bought Univision for $12.3 billion in 2006.
Televisa subsequently fought Univision in U.S. courts for
better prices for its programming.
"Televisa is Univision and Univision is Televisa in the
United States. Our interests are aligned now," Saban said in
TELEVISA LAUGHS LAST?
De Angoitia told Reuters that Univision must restructure
$3.25 billion in debt. At least $750 million would be a
According to de Angoitia, who is an ally of Televisa owner
Emilio Azcarraga, Univision has $10.3 billion in debt.
Most of Univision's debt is due in 2014. The deal with
Televisa will allow the U.S. broadcaster to pay down a
significant chunk, and the extension of the programming
agreement will make creditors more willing to buy longer term
Univision debt, said Jake Newman at CreditSights in New York.
"This (agreement) improves the ability of Univision to get
through the period of that maturity." he said.
Standard & Poor's placed Univision's "B-" rating on
creditwatch with positive implications on Tuesday afternoon.
Shelly Lombard at New York-based Gimme Credit said
Univision's buyers had taken on a lot of debt for an asset that
has been hurt by declining radio revenue. High debt payments
were crimping the chance to turn a profit on their investment.
She likened it to someone who had eaten a lot of pie and
had a tight belt. "There was not a lot of breathing room at
all, so this basically loosens the belt," she added.
Under the agreement, Univision will have unrestricted use
of Televisa content for television, Internet, video on demand
and mobile phones, de Angoitia said.
In exchange for the expanded rights and content, Televisa
will receive through December 2017 larger royalties from
Univision. Right now, royalties amount to 9.36 percent of
television revenue, excluding certain soccer events, but this
will rise to 11.91 percent through 2017.
After that, the rate would rise to 16.22 percent.
de Angoitia said additional royalties would total $50
million in 2011. In 2010, he projected total royalties of $150
Barclays Capital projected that Televisa's royalties from
Univision could triple by 2017.
Televisa's shares closed up 13.75 percent at $21.51 on the
New York Stock Exchange while shares in Mexico gained 12.34
percent to end at 53.61 pesos.
"This could be looked at as Televisa's revenge, someone
else paid too much for Univision and now Televisa is coming in
and riding to the rescue," Lombard said.
(Additional reporting by Ken Li in New York and Michael
O'Boyle in Mexico City; Missy Ryan, Leslie Gevirtz, Robert
MacMillan and Carol Bishopric))