What Will Happen to Televisa’s Stake in Spain’s La Sexta TV?

Televisa (NYSE:TV) just bought a 30 percent of Nextel, for $1.44 billion. The acquisition will provide Televisa the opportunity to provide its customer base with the first quadruple play in Mexico, which paves the way for a successful integrated media and telecom strategy. Meanwhile, Televisa executives are participating in negotiations to merge Spanish television networks Antena 3 TV and La Sexta, in which Televisa holds a 40% stake. Officially however, Antena 3 has only admitted it is "in talks with other television operators, but we have not yet reached any verbal or written agreements,” according to statements made to the Spanish National Securities Market Commission in December.

The delay in reaching an agreement reflects the difficulties inherent in this merger, the first being the number of parties involved. Antena 3 TV has at least three stakeholders (Grupo Planeta, Italy's De Agostini and Germany's Bertelsmann, each owning approximately 20%). La Sexta has even more parties with a say in the deal, due to its ownership structure (Televisa owns 40% of the network, while GAMP is the majority shareholder with 51%. GAMP, in turn, is controlled by Imagina, which belongs to Globomedia and MediaPro partners and counts such heavyweights as WPP Group and investor Juan Abelló among its shareholders).

Added to the difficulties arising from so many “protagonists” is the issue of financial results. While Antena 3 has been reaping profits for years (530 million euros in the past three years), La Sexta has only generated losses (345 million euros in its first three years of operations). As a result, according to reports in the Spanish media, Antena 3 TV is asserting an upper hand in the talks and staking a claim to 77% of the merged company, which would leave the remaining 23% in the hands of La Sexta’s partners. If an agreement is reached, the deal would give Antena 3’s current majority shareholders around a 15% stake in the new company, while Televisa’s partners would get 10%.

The market situation in Spain favors the merger. From a competition standpoint, Antena 3’s main competitor — Telecinco — has already jumped to action and reached an agreement to buy TV network Cuatro from the group. Another contributing factor to any merger has been the steady fall in ad spending, caused by the economic crisis, which puts networks in the position of urgently needing to raise new revenue. If a merger is not reached, La Sexta’s shareholders will need to keep investing capital to maintain the company’s operations. And it should be noted that up until September 2009, Televisa alone had poured 234 million euros into La Sexta, according to financial information published by the Mexican group. According to these figures, all of La Sexta’s shareholders have already jointly invested about 640 million euros in the project, well above the 500 million euros originally estimated in 2006.