Updated 16:00 UTC – 2 July 2015

By Adam R Jacobson

MIAMI — The largest media company in the U.S. serving Hispanics has officially notified the Securities and Exchange Commission that it is proposing an initial public offering of the sale of its Class A common stock, a long-expected move that will make Univision a publicly held entity.

The number of shares to be offered and the price range for the proposed offering have not yet been determined. However, MarketWatch reports that Univision plans to offer $100 million in shares.

According to a source close to the matter, the $100 million figure “is a placeholder number that all IPOs use” and that Univision cannot provide guidance on any number at this time, as it is at the start of the public offering process.  The SEC will respond close to August 1 with an initial round of comments, and Univision will then respond to their comments until the government gives the green light for a Univision road show, which would presumably drum up support from potential investors. Following the road show, Univision will ask to go “effective” right before officially pricing its IPO. “If you look at precedent filings the s-1 in July would imply a Q4 offering,” the source tells Adam R Jacobson.

Additionally, MarketWatch notes Univision plans to trade under the “UVN” symbol on either the New York Stock Exchange or on NASDAQ.

Morgan Stanley, Goldman, Sachs & Co. and Deutsche Bank Securities Inc. are acting as lead book-running managers for the proposed offering.

Univision’s private equity owners include Haim Saban’s Saban Capital Group, TPG Capital, Thomas H. Lee Partners, Providence Equity Partners, and Madison Dearborn Partners.

Mexican media giant Televisa also owns a portion of Univision, and will continue to do so. In a statement released alongside the IPO announcement, Univision said it has entered into a Memorandum of Understanding with Televisa and concurrently amended the company’s all-important Program Licensing Agreement.

The biggest takeaway from this second announcement: Televisa will hold common stock with approximately 22% of the voting rights of Univision’s common stock. Televisa also gains the right to designate a minimum number of directors to Univision’s board of directors.

Imported live and scripted programming from Televisa is highly essential to Univision, and accounts for the majority of the network’s highest-rated programs. Without Televisa, Univision would have significantly less impact in the Hispanic television arena against fierce competitor NBCUniversal, upstart MundoFox and an assortment of cable and broadcast television players including Discovery Networks, Liberman Broadcasting’s Estrella TV, Mexico-based Azteca, and ESPN Deportes.

With today’s PLA amendment, Univision’s exclusive U.S. broadcast and digital rights (with limited exceptions) to Televisa’s programming remains in place for 15 years, up from 10 years–subject, however, to the completion of a minimum amount of net proceeds “and no change of control having occurred,” protecting itself from a hostile takeover.

The revised PLA also slightly adjusts royalty compensation through December 2017, retroactive to January 1, 2015, downward by .07 percent. On January 1, 2018, the royalty rate will increase to 16.13 percent, compared to 16.22 percent under the prior terms. Additionally, Televisa will continue to receive an incremental 2 percent in royalty payments on such media networks’ revenues above an increased revenue base of $1.66 billion, compared to the prior revenue base of $1.65 billion.

The royalty rate will again increase to 16.45 percent starting in June 1, 2018 and for the remainder of the term, compared to the prior rate of 16.54 percent. With this second rate increase, Televisa will receive an incremental 2 percent in royalty payments above a reduced revenue base of $1.63 billion.

Among the deal’s other highlights:

•    Televisa will convert $1.125 billion of Univision debentures into warrants that are exercisable for new classes of Univision’s common stock. As a result of the conversion, Univision’s annual interest payment obligations will decrease by approximately $16.9 million.

•      The conversion of Univision debentures into warrants will have the effect of reducing Univision’s consolidated debt by $1.125 billion. Univision has agreed to pay Televisa on the date of conversion, $135.1 million as consideration for the conversion using a combination of existing liquidity and previously restricted cash, which will become unrestricted as a result of the conversion.

In prepared comments, Univision President/CEO Randy Falco said, “By taking these steps and our pursuit of other related initiatives, Univision is in a stronger competitive position going forward. Televisa is the best Spanish-language content producer in the world, and we are pleased to continue to have its support as we enter the next exciting chapter of Univision’s history.”

Grupo Televisa EVP Alfonso de Angoitia added, “With these transactions we strengthen our relationship further and reiterate our full commitment to Univision and its future.”

ARJ

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