Univision CEO Randy Falco in New York in 2017. Photo: Evan Vucci/Associated Press
Shalini Ramachandran and
Univision Communications Inc.’s board is girding to search for new leadership and is undertaking a business review that could lead to large cost cuts, people familiar with the matter said, on the heels of the Spanish-language broadcaster canceling its initial public offering.
Chief Executive Randy Falco, 64, recently told the board he would like to retire at the end of 2018 when he will turn 65, said Haim Saban, chairman of the board, in a statement.
The Wall Street Journal reported earlier Wednesday that the board was considering new leadership after Mr. Falco raised the prospect of retiring early.
“We at the Board of Univision have reluctantly agreed to Randy’s wishes out of respect and the high regard we have for him as a partner,” Mr. Saban said. Mr. Saban has praised Mr. Falco for diversifying the company, improving its finances, reducing debt and amplifying Univision’s political involvement as a voice for Hispanic America.
“It was the absolute highlight and privilege of my life to serve for the past eight years as the CEO of Univision,” Mr. Falco said in an interview. Mr. Falco is set to work with the board over the next year in restructuring the company and transitioning to new leadership.
Mr. Falco’s accelerated exit is a surprise. In November, Univision extended Mr. Falco’s employment agreement for an additional two years, through January 2020. Some people familiar with the matter said that he had begun to lose favor with some on the board in recent months.
Univision’s private-equity backers—which include billionaire Mr. Saban’s Saban Capital Group, Madison Dearborn Partners and Providence Equity Partners, among others—have retained a consulting firm to undertake a review of Univision’s businesses, some of the people said. The company is contending with a rapidly shifting television landscape, significant ratings declines on its broadcast network and the inability to engineer an exit for the company’s longtime private-equity owners.
The business review could result in cost cuts in the range of $200 million, including significant layoffs, some of the people said. The expense reductions and business review would be aimed at improving the company’s performance and sprucing it up in advance of courting suitors for a potential sale, the people said.
On Tuesday, Univision said it no longer plans to go through with an initial public offering. It had registered for an IPO with regulators in 2015 but repeatedly delayed it because of a rocky IPO market and weakness in media stocks. This week the company also abruptly replaced its chief financial officer, Francisco Lopez-Balboa, a former Goldman Sachs banker who joined in 2015 to take the company public, with longtime Univision executive Peter Lori.
Univision’s owners are under pressure to turn around the company after years of failing to find an exit. The current investors took the broadcaster private in 2007 for $13.7 billion in one of the biggest deals during the leveraged-buyout boom, saddling the company with billions in debt just before the financial crisis. The company still had $8 billion in debt as of December. The private-equity owners also include TPG and Thomas H. Lee Partners.
Univision’s business faces a host of challenges, both to its dominance as the country’s leading Spanish-language broadcaster and to the broader media industry.
Since Univision’s investors began exploring a potential IPO in 2015, the wider media industry has come under strain from cord-cutting, which has eroded the value of television companies.
Five years ago, Univision had more than twice the audience of its closest competitor, NBCUniversal’s Telemundo. That lead has steadily eroded and last season, Telemundo beat Univision for the first time during weekday prime-time viewing among the key 18-to-49 demographic, according to Nielsen.
One executive with knowledge of the culture inside Univision of late said that everybody there is “crabby and cranky.”
Univision has sought to push back at that narrative by highlighting its broad portfolio, which includes the UniMás broadcast network, dozens of television and radio stations, a slate of cable networks such as Galavisión, and a digital business. A Univision spokeswoman noted that during the February “sweeps” period that is important for determining ad rates, 67% of the share of prime time, Spanish-language viewing among adults ages 18 to 49 were on Univision’s portfolio of networks, up from 65% the year earlier.
Meanwhile, the demographic story of an exploding Hispanic population that Univision used to tout to advertisers and potential suitors has been tempered by dwindling immigration from Mexico and other parts of Latin America. Between 2009 and 2014, more Mexicans left the U.S. than entered it, according to Pew Research Center. Executives close to the company worry that as Spanish-speakers stay in the U.S. longer and become assimilated, they will have less reason to turn to a Spanish-language broadcaster.
As Univision tries to rejuvenate its TV show lineup, the company also faces steeper costs. It has a longstanding deal for Mexican TV giant Grupo Televisa SAB to produce much of its programming and Univision’s royalty payments to Televisa began rising at the end of 2017 and will continue to climb this year. Televisa is a minority investor in Univision.
Univision threw cold water on interest from Discovery Communications in 2017 in an acquisition, according to people familiar with the matter. Discovery Chief Executive David Zaslav and cable mogul John Malone had floated an offer at the Sun Valley conference to Mr. Saban that would have valued Univision at more than $12 billion, including debt. But Mr. Saban said he would only accept an offer above $16 billion, some of the people said. Discovery went on to buy Food Network-owner Scripps Networks Interactive Inc.
Three years earlier, Univision’s backers had approached potential buyers asking for north of $20 billion.
Mr. Falco, a former longtime NBC executive, would leave behind a mixed legacy at Univision. Under his watch, Univision branched out into new digital businesses, including acquiring Gawker Media and the Onion and launched new cable channels like Univision Deportes Network. However, the company also lost out on Spanish-language rights to broadcast the FIFA World Cup to rival Telemundo and struggled to modernize its lineup of telenovelas to the edgier fare that appeals to second-generation Hispanic-Americans.
Univision’s struggles have showed up in its financial results. In the fourth quarter, revenue declined 8% to $781 million, while adjusted operating income decreased 11%. Advertising revenue at its media networks segment declined 19% from a year earlier.
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