Mexican investor Carlos Slim could buy up to 30% of struggling Spanish media firm Prisa but is unlikely to fully aquire it, analysts say.
Slim, the world's richest man, recently purchased a 3.2% holding in the debt-laden media firm, triggering speculation that it could launch a full takeover of the publisher of Spain's largest daily, El Pais.
"Under Spanish law, they have the option to buy as much as 30% before being forced to launch a full takeover bid," said Ivan San Felix, an analyst who follows Prisa for Madrid-based Renta 4 Broker.
Slim bought 3.2% of Prisa through his investment vehicle Inmobiliaria Carso on November 18. At the time, Slim spokesman Arturo Elias said the transaction was an opportunistic buy and that Slim was not looking to control Prisa.
However, on November 22, Mexican newspaper Excelsior reported that Slim's conglomerate Grupo Carso and Prisa have held talks about a possible merger or "strategic alliance" since April and that a potential tie-up between the two companies would generate significant economies of scale.
Prisa shares are certainly trading at a bargain price after plummeting to $1.06 from $2.70 roughly a year ago, due to slumping media sales as Spain's economy remains caught in one of the worst recessions in decades.
Prisa is facing payment of a $2.6 billion syndicated bank loan in May 2013 which analysts are unsure it will be able to make. It also has some $665 million of debt due for repayment this year and next.
The firm is looking to renegotiate the $2.6 billion loan or delay payment until 2015 as part of a debt restructuring program, but analysts say banks may not approve this, forcing Prisa to sell key assets such as the Santillana book publisher, which has a strong presence in Latin America. Prisa has already said it may sell as much as $665 million worth of non-core assets to pay down its liabilities.
San Felix, the analyst, said the firm is likely to divest as many of these assets as possible before selling its business on the cheap. Therefore, it will likely block any takeover approaches from Slim or others.
Still, Slim may seek to elevate his participation in Prisa at at time when its shares are trading at rock-bottom prices. After all, Elias told Bloomberg the company presents a "great opportunity," adding that "the conditions are favorable to enter into a company like Prisa."
Prisa's shares may be in a rut but the company holds the best media assets in Spain including newspaper El Pais, pay TV firm Digital +, sport dailies, magazines and top radio channels. "If Slim is interested in participating in Spain's media industry it would make sense to do so with Prisa," San Felix added. He cautioned, however, that the country's media industry will continue to struggle for some years as Spain's economy is unlikely to significantly recover in the near to medium term.
Mexican analysts agreed that while Slim could elevate his Prisa holding, he is unlikely to pursue a full takeover. "I think Slim might buy more Prisa shares to have a participation similar to that in The New York Times, but that's about it," said Martin Lara, an analyst at brokerage Actinver in Mexico City. Slim has signaled that he wants the crown jewel of his business empire - cell phone and pay TV network America Movil - to become a content distributor rather than a provider, Lara noted. Consequently, swallowing a content behemoth like Prisa would counter that strategy.
Another Mexican analyst requesting anonymity said Slim's purchase was "purely financial." "If he was looking to buy Prisa he would have made the purchase through America Movil, not Inmobiliarias Carso," he said.
Through America Movil, Latin America's largest cell phone provider, Slim offers pay TV content in several Latin American countries except Mexico where he is fighting to obtain a TV license. According to the analyst, Slim archrival Televisa owns Spanish broadcaster La Sexta under a joint venture with Prisa, making a full acquisition difficult to achieve as Televisa would probably oppose the deal.
Televisa is fighting to thwart Slim's television ambitions. It and rival TV Azteca have launched bitter complaints against Mexican telecom Telmex (which is majority owned by America Movil and is in the process of being fully acquired by America Movil), for broadcasting media content on its Web Site when it is banned from offering TV services in Mexico.
However, a Mexican Court recently granted Telmex an appeal against the ban, issued by telecoms regulator Cofetel. Earlier this month, Cofetel said it will review the court's reversal and publish a final decision before Christmas, giving Telmex renewed hopes that it might win the coveted permit.
With a market capitalization of $1 billion, Prisa owns several Mexican radio stations including Radiopolis, shared 50/50 with Televisa. Earlier this year, Slim also made a big media buy, increasing his stake in the New York Times to around 8% in what the market viewed as another financial investment.