How Hot Is Univision?
It owns the market, and the market is on fire
By Wayne Friedman -- Broadcasting & Cable, 3/5/2006 7:00:00 PM
Univision is still in one of those rare dominant industry-leading positions in media, akin to what the U.S. English-language broadcasting networks were in the 1960s and '70s: It is pretty much the only game in town.
That is why some company will have to pay a pretty penny to buy it.
With its unmatched position in the still double-digit–growth market of Spanish-language TV, Univision, which said last month that it's exploring a sale, is looking for a rich price tag of $40 a share, according to analysts who follow the company. That's about $12.5 billion and would equate to 19 times cash flow and a 36 price-to-earnings ratio. By way of comparison, Viacom is selling at 11 times cash flow; CBS is an even cheaper eight times cash flow.
Even so, Univision may still be valued correctly. Its TV-advertising sales at both the network and the station level have seen virtual double-digit percent increases for the past several years.
“Those aren't irrational multiples,” says David Joyce, media equity analyst for Miller Tabak & Co. “That's because there are still top TV advertisers that don't buy Univision.”
Only 170 of the top 300 TV advertisers buy Univision right now, he notes, so there are untapped opportunities. That's why he estimates that Uni­vision's EBITDA (earnings before interest, taxes, depreciation and amortization) will continue to grow 17% annually for the next several years.
Another staggering statistic: The Univision network's share of market is still at a nosebleed height, around 80%. Telemundo's share, though growing, is much smaller.
But buying Univision is a problem. FCC ownership limits one owner's stations from covering more than 39% of the country. CBS and Fox are near the limit. Time Warner might be interested (it doesn't own any broadcast outlets). So might Walt Disney Co. (its ABC stations cover 24% of the U.S.).
Any deal would have to include some arrangement with Grupo Televisa, the Mexico-based production company that owns 11% of Univision and provides most of its programming.
Televisa itself could buy Univision. But Televisa Chairman/President Emilio Azcarraga would need to “do a Rupert Murdoch”: become a U.S. citizen as well as relocate the company to the U.S. to conform with FCC rules that prohibit a foreign entity from having more than a 25% stake in a media company. Televisa must be dealt with because it provides so much content to Univision. “Anyone that wants to get this done will have to court Televisa,” says Joyce.
That could rule out the gang at the Mouse House. “Disney likes to own content,” not buy it, said Philip Remick, senior equity analyst for investment banker Guzman & Co.
Univision's TV revenues last year were an impressive $1.35 billion. Will all this continue? Some analysts offer a great big caution flag, especially considering the rise in affluent, bilingual young Latinos. “Spending power of the Spanish-language audience is in question,” says Remick. “As certain Hispanics become more affluent, they may use other [English-language] media platforms. Another question is how many will be using Spanish. [As a result,] Univision may be facing a loss of audience.”
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