Published: September 13 2010
The stabilisation of Prisa through a $900m equity injection should be sealed next month, transforming the world’s largest Spanish-language media group from a family owned company to one with Spanish and US listings.
Liberty Acquisitions, a special purpose acquisitions company, was forced to restructure its initial investment proposal after worries about the Greek economy rippled through southern Europe, shaking investor confidence in Spain.
Martin Franklin, Liberty’s chairman, told the Financial Times he hoped to secure clearance from the Securities and Exchange Commission next month for the listing of American Depositary Receipts.
He said completion of the refinancing would give Prisa “breathing room” for a more aggressive pursuit of digital opportunities, international expansion and synergies between its print, radio, online and education assets.
Prisa, which owns the best-selling El País newspaper and Spain’s largest pay-TV operator, was hit hard by the global financial crisis and advertising downturn. Coming immediately after a string of expensive acquisitions, the recession left the company precariously over-leveraged and under creditor pressure to sell assets.
After a series of small divestments, Prisa late last year agreed to sell 44 per cent of Digital Plus, the satellite pay-TV business, to Mediaset, Silvio Berlusconi’s group, and Telefónica, the Spanish telecoms company. As part of the same deal, it ceded control of channel Cuatro, its free-to-air television station which is being merged with Mediaset’s Telecinco.
Mr Franklin, whose Jarden household products empire is a collection of niche brands from K2 snowboards to fire logs made from coffee grounds, emerged six months ago with a plan to put $900m into Prisa, seeking to stabilise its finances after its net debt ballooned from €600m ($770m) to €5bn between 2005 and 2008.
Mr Franklin and his partner Nicolas Berggruen, an art collector’s son with an investment empire spanning Cambodian rice farms, property and now Germany’s Karstadt department store group, were quickly forced to restructure their proposal after worries about the Spanish economy sent Prisa’s shares tumbling.
According to the latest investor presentation, the Madrid-based group aims to cut net debt from €4.75bn, or 7.7 times ebitda now, to 2.2bn, or 3.5 times historical ebitda, over the next few years.
The reconfigured transaction essentially lowered Liberty’s entry price, giving it a larger share of the company than initially planned but offering Prisa shareholders warrants exercisable at €2 to recover some of the dilution they will suffer. Prisa shares stood at €1.67 on Friday.
Analysts have been critical of the deal’s dilutive effect, which will reduce the Polanco’s family shareholding from 70 to 30 per cent.
N + 1, the Spanish brokerage, said in a recent note that “Prisa has destroyed massive value for the shareholders, and the Liberty deal is just another example”. It adds: “In our view the process has been very poorly handled by Prisa’s management, who seem to have disregarded shareholders’ interests.”
However, most analysts agree that Prisa’s shares are undervalued, and that Liberty and minority investors stand to benefit from a turnround.
Among a range of options under consideration is an initial public offering of part of the Brazilian business of Santillana.
With some pressure off Prisa’s balance sheet, Mr Cebrián seems likely to spend more time looking at opportunities outside Spain, including the Hispanic market in the US.
“US Hispanics have more population, more GDP and more advertising investment than Spain, and there are more people learning Spanish there,” he notes.
A diverse US Hispanic population is unified only by the Spanish language, he argues, “but the problem is the quality of the product [Spanish programming] has been very low”.
“They’d like to watch more television in Spanish if the product was good enough,” he says.
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