Televisa Investment Good for Univision and “Sabado Gigante”

As someone who grew up watching “Sabado Gigante,” I was amazed (and happy!) when Televisa announced it would invest $1.2 billion in Univision.

The two broadcasters have been bitter rivals for forever it seems. Televisa, with the deal, gets a 5% stake in Univision as well as debt that is convertible into another 30%. On Wednesday, Standard & Poor’s placed Univision’s “B-” rating on creditwatch with positive implications. The Televisa deal improves Univision’s financial flexibility and resolves uncertainty regarding Univision’s programming license with Televisa, its main program supplier, S&P said.

The Televisa deal is good news for Univision, which broadcasts “Sabado Gigante” (Giant Saturday), hosted by Don Francisco. The show claims to be the world’s longest running variety show. Televisa will be the main provider of programming that Univision broadcasts across the United States through 2020, Reuters says. More importantly, the deal gives Univision access to Televisa’s telenovelas—including “Llena de Amore” (Full of Love) and “Soy Tu Duene” (Woman of Steel)—which are the mainstay of its programming.

This isn’t to say that Univision doesn’t have its own programs. Univision has “El Gordo y La Flaca” (The Scoop and The Skinny), “Quien Tiene Razon” (Who’s Right?) as well as “Sabado Gigante.”

“In our opinion, the announcement alleviates risks surrounding the company’s advantageous contract with Televisa, which we believe supports its strong audience ratings, revenue, and high EBITDA margins,” said Heather Goodchild, a S&P credit analyst, in a statement.

Univision is highly leveraged with $10.3 billion in debt. The company is expected to restructure $3.25 billion in debt and issue at least $750 million of bonds, Fitch Ratings said.

The Televisa deal “is a major first step toward establishing a more sustainable long-term business and more tenable capital structure,” for Univision, Fitch said.

The deal also represents revenge for Televisa, which lost its bid to buy Univision three years ago. In 2007, Haim Saban and a group of PE firms (Madison Dearborn Partners, TPG, Providence Equity, and Thomas H. Lee) bought Univision for $13.7 billion. The deal valued Univision at more than 15x EBITDA. The PE owners are staying with Univision and not cashing out. The investment from Televisa goes into the company, a spokesman says.

According to Breaking Views, Televisa’s deal for Univision values its equity at $2.3 billion. The five original buyers of Univision kicked in $4 billion for the company. Univision yesterday also dropped its long-standing lawsuit against Televisa over digital rights to its shows, the New York Post says.