Bidding Process Lags for Univision

The future of Univision Communications Inc. remained in limbo a day after the call for bids was supposed to close as the company weighed a single bid that fell short of its expectations and waited for another from a group that's undergoing its own internal turmoil.

Univision, the largest Spanish-language broadcaster in the United States, has grown along with the Spanish-speaking population, beating mainstay English-language networks to the No. 1 spot in some markets. But investors are concerned that the network will not be able to sustain its revenue growth as other Spanish-language media outlets, such as Telemundo, challenge Univision's programming dominance and advertising strategies change throughout the industry, analysts said.

"There's a lot more competition in Spanish media," said Philip J. Remek, senior media analyst for the Miami-based investment banking firm Guzman & Co. "There has been an ongoing reallocation of advertising spending from television to the Internet, and Univision is not immune to that trend."

Even so, the outlet boasts a strong audience. Univision reaches 98 percent of Hispanic households and is the country's fifth-largest network, according to Nielsen Media Research.

Competing stations may be gaining ground in certain markets, but Univision is still the dominant network, said David W. Miller, managing director at the Sanders Morris Harris Group in Los Angeles.

"If you want to advertise to the Spanish-language population on a national level, you only have one choice, and that's Univision," he said.

A. Jerrold Perenchio, 75, Univision's chief executive and controlling shareholder, put the network up for sale in February and expected bids as high as $13 billion from several big media companies, such as CBS Corp. and Time Warner Inc.

But, so far, the only bid has come from a group that includes billionaire investor Haim Saban, 62, Providence Equity Partners Inc., Madison Dearborn Partners LLC, Thomas H. Lee Partners LP and Texas Pacific Group. The group offered more than $35 per share, less than the $40 the company had hoped for. With 305 million shares outstanding and $1.4 billion in debt, the total offer comes to about $11 billion plus the assumption of the debt.

Sources close to the process said that the private equity firms that are putting up much of the capital balked at paying more because their own costs associated with borrowing money have risen sharply in recent weeks. Central banks around the world, including the Federal Reserve, are raising interest rates and investors are starting to demand higher returns on loans they see as risky.

Similar concerns have delayed a potential bid from a second would-be bidder, Mexican broadcaster Televisa and a consortium of private equity firms that includes Bain Capital and Cascade Investments.

Three potential partners in the Televisa bid -- Blackstone Group, Kohlberg Kravis Roberts & Co. and District-based Carlyle Group -- have dropped out of the consortium in the past week because they feared that a winning bid would have to overpay, according to sources familiar with the process.

Carlyle officials also had concerns about the complicated governance structure of the bidding consortium, which was necessary in part because foreign companies are not allowed to be majority owners of U.S. broadcast networks.

A Televisa spokesman said that the remaining partners are still committed to bidding on Univision. "We're confident that we'll come forward with the most attractive bid," the spokesman said.

Televisa and its remaining partners are still expected to submit an offer, and they could spark a bidding war with the Saban group. But it is unlikely that the share price will reach the heights that Univision's leaders had hoped for, the sources said. A Televisa bid would almost certainly face more regulatory hurdles than the Saban bid and therefore might require a sweeter offer.

Spokesmen for Carlyle, KKR, Blackstone, Televisa and Univision all declined to discuss the bidding process.

Even though the initial bid falls short of Univision's expectation, analysts said they expect the deal to close unless a more enticing offer comes through.

Ivan Feinseth, an analyst with Matrix USA LLC, said even a bid of $10 billion or $11 billion seems "excessive and overly optimistic."

Univision "would have to grow significantly from current levels to even justify where the stock is now," he said. Perenchio may turn down the bid, "but where else is he going to go? The best bid is right there."