El Sitio merges with Cisneros joint venture

El Sitio (Nasdaq: LCTO) and Ibero American Media Partners (IAMP) announced Monday they will merge, creating a content company for Spanish and Portuguese speakers. The combined entity, Claxson Interactive Group (CIG), will be the first publicly traded independent content company in Latin America.

El Sitio shares closed up 0.56 to 3.875 Friday. Rumors about a deal have been afoot since Thursday, when Reuters reported the company was in talks.

IAMP is a joint venture of the Cisneros Group of Companies and Hicks, Muse, Tate & Furst Inc. (Hicks Muse), the parent company of Cisneros Television Group. El Sitio is an Internet media company providing interactive content for Spanish and Portuguese speakers.

CIG will combine assets including; IAMP's assets such as Chilevision, Radio Chile and an interest in Caribbean Communications Network (CCN); and El Sitio's businesses in Argentina, Brazil, Chile, Colombia, Mexico, the United States and Uruguay. The new company will deliver content via multiple platforms, including cable television, Direct-to-Home Satellite television (DTH), broadcast television and radio and the Internet.

Cisneros Television Group also signed a deal to distribute content from its pay television channels through AOL Latin America (Nasdaq: AOLA). Initially, the agreement will cover the Cl@se and Infinito channels. Separately, El Sitio has announced that it intends to sell its ISP business in order to focus on the development of branded content.

Under the terms of the deal, each El Sitio share will be exchanged for one share of CIG. Current El Sitio shareholders, including IAMP, which has an 18 percent stake, will own 41.5 percent of CIG's common shares. The combined company will have about 109.5 million common shares outstanding, of which 37 percent will be held by the Cisneros Group, 29 percent by Hicks Muse, and 34 percent by shareholders of El Sitio (excluding IAMP). Roberto Vivo, Chairman and co-founder of El Sitio, will become Chairman and CEO of CIG.

On a pro forma basis for the 12 months ended June 30, the combined company had net revenue of about $119 million, available cash of about $119 million, long-term debt of about $116 million and shareholders equity of $409 million.