Tricky tango awaits suitors

Univision buyer must deal with Televisa

By ANNA MARIE DE LA FUENTE, MICHAEL O'BOYLE

Just as Disney's Bob Iger had to mend fences with Pixar once Michael Eisner left Disney, whoever buys Univision will have to appease the company's main programming supplier, Mexican powerhouse web Televisa.

Televisa is bent on pursuing a court order to relieve it of its 25-year programming supply pact with Univision, regardless of changes of ownership.

"We've been hired to get a trial, get a judgment and get the contract back," says Televisa's Los Angeles-based lawyer Marshall Grossman.

Although some analysts have bandied about a Televisa acquisition of the U.S. Spanish-language TV giant, Grossman says he has not heard of any such plans. A trial is scheduled for February 2007, he adds. The programming supply accord expires in 2017.

A Televisa spokesman says Univision's sale would be "convenient" as new owners might agree to a more lucrative programming deal for Televisa or give it a greater voice within Univision, which Televisa topper Emilio Azcarraga Jean wants.

Corporate governance issues raised by the lawsuit may have something to do with the decision of Univision chairman, prexy and CEO A. Jerrold Perenchio to sell.

The filing alleges that Univision gave free ad time to companies related to it that cheated Televisa out of ad revenue. The lawsuit also claims that Univision has refused to hand over financial records that would allow Televisa auditors to verify its due royalties.

Grossman says he could not estimate how much Univision owes Televisa above the $1.5 million named in the first lawsuit lodged early last year.

Rather than face embarrassing allegations, Perenchio, now 75, may want to cash in on his lucrative investment. Univision is expected to seek a price in excess of $40 a share, which could nudge the purchase price to more than $13 billion.Televisa has a lot to gain by getting out of its programming supply deal while Univision has much to lose.

While Univision produces strong news and variety shows, its one Perenchio-produced telenovela, 2003's "Te amare en silencio," was so unwatchable that Univision's then programming veep Mario Rodriguez allegedly resigned when he was forced to air it.

For that reason alone, a new owner would do well to cultivate a more amicable relationship with Televisa, which provides the telenovelas that drive Univision's ratings dominance.

Without them, Univision would be nearly worse off than distant second NBC U-owned Telemundo.

Telemundo has been producing telenovelas five to six years, building up a library and an international value for its inhouse programming.

The NBC U unit now produces 20,000 hours of programming a year, second to Televisa's 50,000.

All this will be moot if Televisa buys Univision.

Although hamstrung by FCC regulations that cap foreign media ownership to 25%, Televisa has more than $1 billion in cash and some analysts suggest Televisa could team up with equity partners to buy Univision.