Why is Televisa seeking a merger with Megacable?
The transaction sets a premium in Megacable 19% higher than Televisa Izzi’s cable businessusing a valuation metric that compares earnings before interest, taxes, depreciation and amortization (Ebitda) in the last 12 months, based on the third quarter results of the two firms, according to the document.
In addition, Televisa would offer Megacable shareholders a special dividend of 14.8 billion pesos (about 745 million dollars) at the closing of the operation, which would be financed by external lenders or by its own available cash.
Megacable, which offers pay television, internet and telephony services in Mexico, and has a market capitalization of 42.6 billion pesos (about 2.14 billion dollars), according to Refinitiv data, would continue to trade on the stock market as the surviving entity of the merger .
Televisa’s offer comes after a series of spin-offs by large local companies to revive depressed stock prices. In October, the media giant presented a plan to spin off its sports and gaming operations, claiming the move would cut corporate spending.
The new Megacable could end up with up to 40 billion pesos in new debt, part from Televisa and part used to finance the special dividend, but the latter company explained that the combined company’s net leverage will be 1.5 times its annualized Ebitda, based on in third-quarter results, which he said were below industry peers.
What will happen in the cable TV market?
The joint firm would have revenues of 75 billion pesos based on the results of the two entities in the 12-month period ending September 30, Televisa’s offer indicates.
“It is in the process of deliberation,” the source said, about Megacable’s position on the offer. Representatives for Megacable and Televisa did not immediately respond to a request for comment.
Televisa had more than 62% of the pay-TV market in 2021, while Megacable owned around 21%, according to data from local telecoms regulator IFT.
Televisa’s letter details that the combination would create “one of Mexico’s leading cable operators, better positioned to compete than either one alone.” It was unclear if the deal would face antitrust scrutiny.
In October, Megacable announced that it would invest 2 billion dollars in the next five years to expand its network and reach new cities. So far this year it has expanded to 11 and aims to reach 15 more by the end of the year.
