Grupo Televisa SAB (TLEVICPO) agreed to a $745 million transaction that would give it control of Mexico’s Cablecom, strengthening its grip on the growing pay-TV market.
Televisa is acquiring 7 billion pesos ($549 million) in debt that’s convertible to a 95 percent stake in Tenedora Ares SAPI, which owns 51 percent of Cablecom, according to a filing today. Ares also has an option to acquire the rest of Cablecom. As part of the deal, Mexico City-based Televisa said it also bought about 2.5 billion pesos in Ares debt.
The transaction is part of a strategy by Televisa, the world’s largest Spanish-language broadcaster, to reduce its dependence on over-the-air TV advertising as more Mexicans sign up for cable and satellite. In the past six years, Televisa has spent billions to snap up stakes in two cable carriers, a telecommunications company and a wireless provider.
If it turns the convertible debt into control of Cablecom, Televisa would be adding about 840,000 pay-TV customers in Mexico, on top of its current base of 7.9 million cable and satellite users -- the most in the nation. The company would need regulatory approval to acquire the Cablecom stake, it said.
Televisa rose less than 1 percent to 69.72 pesos at the close in Mexico City trading. The shares have climbed 2.2 percent this year.
Cablecom, officially known as Grupo Cable TV SA, also has about 360,000 other connections to customers, comprising Internet and phone lines.
The option Ares owns to acquire the rest of closely held Cablecom would value the company at 9.3 times earnings before interest, tax, depreciation and amortization for the 12 months preceding the transaction, Televisa said. Cablecom expects 1.6 billion pesos in Ebitda for 2014, on sales of 3.9 billion pesos, Televisa said. At that level of profit, the option would value Cablecom at 14.9 billion pesos.
In 10 pay-TV merger deals announced in the past 12 months around the world, companies have paid an average of 6.5 times Ebitda, according to data compiled by Bloomberg.
By taking control of Cablecom, Televisa would be snatching up one of the few remaining large cable operators operating independently in Mexico. Megacable Holdings SAB is the biggest, with 2.1 million video subscribers.
Grupo Hevi, the closely held owner of Mexico’s Telecable TV service, hired Barclays Plc to explore a sale, people familiar with the matter said earlier this year. The company has about 350,000 subscribers.
Televisa, which already held stakes in Empresas Cablevision SAB and satellite provider Sky, acquired 50 percent of cable company Television Internacional SA in 2006 for about 800 million pesos. It won approval the following year to buy a 49 percent stake in Cablemas SA for $258 million, agreeing to make its broadcast channels available to rival pay-TV providers. It took full control of Cablemas in 2011 for about $400 million.
In 2007, Televisa acquired Bestel, a long-distance phone carrier, for $256 million. And last year, Televisa got a 50 percent stake in mobile-phone provider Grupo Iusacell SA in a $1.6 billion deal.
Mexico’s government passed a law this year seeking to boost competition in telecommunications, in part by creating a new regulator that act as the industry’s antitrust agency. The new government entity is still being put together, and its commissioners haven’t yet been appointed.
The Televisa deal is the second announced this week in Mexico’s telecommunications industry. Yesterday, Paris-based Eutelsat Communications SA (ETL) said it would acquire Satelites Mexicanos SA, which provides satellite services to companies including Televisa, for $831 million.
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