Univision's up for grabs

Suitors circle Spanish-language net

By JILL GOLDSMITH

NEW YORK -- Spanish-language giant Univision planted its official "for sale" sign Wednesday amid a flood of speculation on which U.S. media player may reel in the sought-after broadcaster.

Univision said it hired investment bank UBS -- which repped the company in the acquisition of Hispanic Broadcasting -- to explore strategic options, including a sale. Company has been signaling its intentions for months by streamlining and shedding jobs.

It's talked in the past with Time Warner, Disney and Viacom, but the sides could never agree on price.

This time, the L.A.-based Univision's feisty chief and controlling shareholder, A. Jerrold Perenchio, 74, may be ready. Growth-challenged media companies may be more apt to pay up for what's regarded as a unique asset.

A buyer would have to consider a nasty legal battle between Univision and its largest programming supplier, Televisa -- unless, that is, the Mexican media company makes the deal itself.

Univision stock exploded Wednesday, surging nearly 12% to close at $34.20; that values the company at about $10.4 billion. Wall Streeters said the pricetag would be higher, closer to $40 a share.

The Hispanic market is younger and more dynamic than the English- speaking, which means Univision is considered a prize. That's particularly true as traditional broadcasters face a prolonged slowdown, their ad revenue squeezed in key categories and by renewed competish from the Net.

Disposable income among U.S. Hispanics is expected to reach $736 billion this year and could skyrocket to $1.1 trillion by 2010.

While that hasn't yet translated into massive revenue gains at Univision, Wall Street is hopeful.

Anthony DiClemente, an analyst at Lehman Brothers, called Univision "one of the few growth stories remaining" in the industry.

Among possible buyers, a deal with CBS Corp., which has long coveted Univision, would land Leslie Moonves' company with too many TV stations to stay within the FCC's ownership cap. Ditto with News Corp., although some suggest these companies could be willing to shed stations.

"We only read about it today like everybody else," News Corp. chairman-CEO Rupert Murdoch said during a conference call. "We will be looking at it."

Disney and Time Warner are in the clear station-wise. However, Disney says it's focusing on content, and it's in the process of acquiring Pixar Animation Studios for $7.4 billion.

Time Warner is fending off corporate raider Carl Icahn. Icahn's campaign slams what he calls excessive corporate overhead but would seem to favor spending to enhance TW's business.

NBC Universal likely has its hands full running Univision's smaller rival, Telemundo, which it acquired in 2002 for $2.7 billion.

Telemundo has been ramping up its inhouse production and now churns out 20,000 hours of programming a year -- second only to Televisa's 50,000 hours.

Some Wall Streeters urged U.S. media congloms to just walk away.

"Although Univision is a unique and scarce asset, we think most large- cap media companies are better off growing in Hispanic media organically than paying top price ... given the poor M&A track record of entertainment conglomerates," said Spencer Wang, an analyst with JPMorgan.

Meanwhile, Televisa owns about 11% of Univision, and its chairman, Emilio Azcarraga, has indicated he'd consider a run at it.

His problem is that foreign companies can't control more than 25% of a U.S. broadcaster, so he'd need partners. They're easy to find these days as private equity groups troll the globe for media investments.

Azcarraga could also try to become a U.S. citizen. That's how Aussie Murdoch bought his stations.

Televisa sued Univision last year for breach of contract, saying it underpaid royalties under terms of the partners' programming and licensing agreement. Univision countersued.

Televisa's lawsuit may be "at least partially designed to obtain a seat at the table, since any bidder would think twice before purchasing a company involved in litigation with its primary supplier," said Jessica Reif Cohen of Merrill Lynch.

Certainly, a new owner would have to cultivate a relationship with Televisa, the driving force behind Univision's ratings dominance. Univision has almost no experience producing fiction -- namely, the crucial telenovelas that keep viewers glued to the set.

Univision also buys the dramas from Colombia's RCN, Venezuela's Venevision and others, but those air in daytime slots, not primetime. It's Televisa's Mexican telenovelas that have resonated best with the Mexican-dominant Hispanic auds in the U.S.

Univision's assets include broadcast nets Univision and Telefutura, the Galavision cable net, 62 TV stations, 69 radio stations, Univision Music Group and Univision Online.

(Anna Marie de la Fuente in Los Angeles, Mary Sutter in Miami and Michael O'Boyle in Mexico contributed to this report.)

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