News Articles

Spanish-language mergings

Speculation is rampant on the next up as Univision, Hispanic Broadcasting tie the knot 6/16/2002 08:00:00 PM Eastern

David Boies vs. Clear Channel

David Boies vs. Clear Channel

Superstar lawyer David Boies is taking on Clear Channel, the country's largest radio group and rising TV-station operator. As Clear Channel faces a growing number of accusations by rivals and public advocates, the media giant has now attracted the attention of a big-time litigator. Superstar lawyer David Boies last week filed an antitrust suit in the Miami U.S. District Court against Clear Channel Communications and Hispanic Broadcasting (HBC, part owned by Clear Channel), accusing the two companies of a string of bad deeds against one of its competitors, Spanish Broadcasting System (SBS), which operates a couple dozen stations nationwide.

By taking on Clear Channel, which Boies alleges tried to interfere with SBS's initial public offering, Boies and SBS are challenging the nation's largest radio-station group (1,200) stations, which already faces other accusations by rivals and public advocates around the nation. The suit could add some unwanted scrutiny to Univision's planned $3.5 billion purchase of Hispanic, announced the same day Boies filed.

Among the allegations:

  • Clear Channel CFO Randall Mays called lead underwriters in summer 1999 to get them to withdraw from the offering.

  • After the deal, Clear Channel and HBC sought to depress Spanish Broadcasting's stock price by threatening to withhold business from analysts' employers.

  • The companies breached Spanish Broadcasting's long-term sales-representative contract with Clear Channel-owned Katz Hispanic Media.

  • The companies attempted to keep SBS from acquiring stations by launching bidding wars and interfering with transaction contracts.

Clear Channel Chief Executive Lowry Mays called the charges "frivolous" and pledged to "fight vehemently to defend our position."

Boies' most high-profile cases recently were representing the U.S. government in its antitrust suit against Microsoft and Al Gore in his court fight for the presidency.

Will radio-station group Spanish Broadcasting System (SBS) be next? That was the speculation in the wake of last week's proposed $3.5 billion acquisition of Hispanic Broadcasting Corp. by Univision.

The Univision-Hispanic Broadcasting deal would combine the top U.S. Spanish-language TV broadcaster with No. 1-ranked (by revenue) Spanish-language radio group.

The proposed tax-free stock transaction gives Univision shareholders about 73.5% of Hispanic Broadcasting's fully diluted economic ownership. If it's approved by regulators, the parties expect the deal to be completed by the end of the year.

Clear Channel Communications, a major investor in Hispanic Broadcasting (roughly 26%), has agreed to vote in favor of the merger, as have the boards of Univision and Hispanic, and will take an approximately 7% ownership stake in Univision.

But things could get complicated. On the same day the Univision-Hispanic deal was announced, Spanish Broadcasting filed an antitrust suit against Clear Channel and Hispanic (see box, below).

Merrill Lynch broadcasting analyst Keith Fawcett last week concluded in a report that SBS would make "an attractive takeout candidate for a company looking to gain a foothold in Spanish-language media."

Based on Univision-Hispanic valuations, he says, SBS might fetch $20 per share (or close to $1.3 billion), about a 75% premium over its current stock price.

Univision and Hispanic Broadcasting execs played up the cross-platform advertising and promotion benefits of the deal.

"Together, we'll be more successful in attracting advertisers who have not made the decision to come into this market," says Hispanic Broadcasting Chairman MacHenry T. Tichenor Jr., who will continue to run the radio group as a Dallas-based subsidiary of Univision. He will also join the Univision board of directors.

The deal comes six months after Univision launched its second U.S. TV network, Telefutura. Univision paid $1.1 billion to buy the USA Broadcasting TV stations, which now form the distribution backbone for Telefutura.

Hispanic had about $241 million in revenues last year. Univision said the combined companies would have pro forma 2002 revenue of between $1.39 billion and $1.44 billion and operating cash flow of between $433 million and $469 million.

David Boies vs. Clear Channel

David Boies vs. Clear Channel

Superstar lawyer David Boies is taking on Clear Channel, the country's largest radio group and rising TV-station operator. As Clear Channel faces a growing number of accusations by rivals and public advocates, the media giant has now attracted the attention of a big-time litigator. Superstar lawyer David Boies last week filed an antitrust suit in the Miami U.S. District Court against Clear Channel Communications and Hispanic Broadcasting (HBC, part owned by Clear Channel), accusing the two companies of a string of bad deeds against one of its competitors, Spanish Broadcasting System (SBS), which operates a couple dozen stations nationwide.

By taking on Clear Channel, which Boies alleges tried to interfere with SBS's initial public offering, Boies and SBS are challenging the nation's largest radio-station group (1,200) stations, which already faces other accusations by rivals and public advocates around the nation. The suit could add some unwanted scrutiny to Univision's planned $3.5 billion purchase of Hispanic, announced the same day Boies filed.

Among the allegations:

  • Clear Channel CFO Randall Mays called lead underwriters in summer 1999 to get them to withdraw from the offering.

  • After the deal, Clear Channel and HBC sought to depress Spanish Broadcasting's stock price by threatening to withhold business from analysts' employers.

  • The companies breached Spanish Broadcasting's long-term sales-representative contract with Clear Channel-owned Katz Hispanic Media.

  • The companies attempted to keep SBS from acquiring stations by launching bidding wars and interfering with transaction contracts.

Clear Channel Chief Executive Lowry Mays called the charges "frivolous" and pledged to "fight vehemently to defend our position."

Boies' most high-profile cases recently were representing the U.S. government in its antitrust suit against Microsoft and Al Gore in his court fight for the presidency.

September
October