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Competition, regulation, pricing weigh on potential Univision sale

At its peak, programmer Univision Communications Inc. was the unquestioned TV leader among U.S. Hispanic viewers. But more than a decade after Univision's $12.3 billion purchase by a private investor group, media analysts say a host of issues are weighing on its potential sale.

The most likely bidders include media conglomerates, Spanish-language programming competitors and international companies, the analysts said. But pricing, timing and the regulatory landscape could work together to limit the number of bids.

Univision is seeking a sale after unfavorable market conditions led the company to withdraw plans for an initial public offering in 2018. The company has attracted interest from John Malone's Liberty Media Corp. and Discovery Inc. in recent years. Industry experts also pointed to a number of other potential buyers.

A shifting landscape

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Rival programmer Telemundo (US) has been gaining on Univision since Comcast Corp. bought Telemundo owner NBCUniversal Media LLC in 2011. Although Univision remained the top Spanish-language network in prime time during the 2018-2019 TV season, averaging 1.4 million viewers, including 570,000 adults ages 18 to 49, Telemundo is narrowing Univision's lead. In an attempt to solidify its position with its core U.S. Hispanic consumers, Univision in the past year has revamped its management team and abandoned an effort to expand to more bilingual and millennial audiences.

From a gross network ad sales perspective, Telemundo surpassed Univision in 2018. According to data from Kagan, a media market research group within S&P Global Market Intelligence, Telemundo tallied $930.8 million in network ad sales, fueled by contributions from coverage of the FIFA World Cup from Russia and the Winter Olympics from Pyeongchang, South Korea. From a station perspective, Univision generated $656.9 million in net ad revenue in 2018, more than 2.5 times Telemundo's ad haul. Univision's retransmission-consent revenue of $734.9 million was nearly 4 times greater than Telemundo's total.

Demographic shifts could drive more change in the future. Adam Jacobson, editor of the Radio + Television Business Report, said younger U.S. Hispanics' increasing interest in general-market content could reshape the competitive landscape for Hispanic audiences over the next decade. Jacobson is an expert in developments in the U.S. Hispanic marketplace.

Joe Schramm, the founder and senior partner of specialty agency Schramm Marketing Group, predicted that there will always be a place for culturally relevant content, however. "There is room for both approaches," he said.

Schramm said Univision would be well served by being "tucked in" with a major media company with more resources to support it. "Telemundo would not be where it is today without Comcast," he said.

Merging media interests

Kagan media analyst Justin Nielson said Comcast/NBC is the most logical strategic buyer for the Univision TV division, though such a deal would likely draw intense regulatory scrutiny.

A Comcast bid for Univision would consolidate of the top two Spanish-language TV networks since Comcast also owns Telemundo through its NBCUniversal unit. Nielsen pointed to the U.S. Department of Justice's recent approval of Walt Disney Co.'s purchase of myriad assets from 21st Century Fox Inc. as a potential sign that such a deal could gain approval.

Fox Corp. the entity that emerged in the wake of the Disney deal, could also be a fit for Univision, given its emphasis on news and sports programming and its interest in expanding station reach, Nielson said.

As to U.S. media conglomerate Disney, the timing might not be ideal for a Univision deal, given that Disney is still integrating the recently acquired 21st Century Fox assets and focusing on building its streaming service, Disney+. Jacobson also noted that Disney already had a look at Hispanic programming through Fusion (US), a news-focused cable and digital partnership aimed at English-speaking Hispanic millennials, which Disney exited in 2016.

CBS, which is reportedly considering a recombination with Viacom, is looking for more scale. For Jacobson, though, Univision's viewership does not necessarily match up well with CBS' older audience.

Programming supplier and minority holder Televisa could finance a buyout of Univision, and Nielson is also keeping an eye on HC2 Holdings Inc., led by billionaire Philip Falcone, which acquired Azteca America late in 2017.

The analysts also said Altice USA Inc., which was spun out of Altice Europe, could burnish its cable operation through the addition of Galavision (US), TUDN and the rest of Univision's cable portfolio while entering the broadcast arena via Univision and UniMás (US). Schramm said international companies may take a look as well, as they look to gain a toehold with a growing demographic in the U.S.

As to private equity firms, Nielson said Univision's debt load, which stood at $7.5 million as of the end of the first quarter, remains "untenable." He does not see most private equity firms having an interest unless Univision is offered "at a deep discount" to prices sought a few years ago.

"It may make more sense to break up the TV and radio divisions and find a different buyer for each," Nielson said.