Big media's Spanish lesson
Univision is up for sale, but other Spanish-language media companies might be takeover targets as well.
NEW YORK (CNNMoney.com) - Spanish language broadcaster Univision is "muy caliente" on Wall Street these days.
The company is also expected to attract interest from large U.S. media companies such as News Corp., Time Warner, and CBS. (Time Warner owns CNNMoney.com.)
Univision is coveted by so many firms because it is, by far, the best way for a larger media company to capitalize on the growing popularity of Hispanic television and radio.
Advertisers have realized that the Spanish-speaking demographic is a key market for them. And this year, Univision is expected to see strong ratings for its Spanish-language broadcasts of the World Cup soccer tournament.
As such, the company's profits are expected to increase by 25 percent this year and nearly 15 percent in 2007, growth rates that are higher than what analysts are predicting for most English-language media firms.
But analysts say a takeover of Univision could wind up having a major ripple effect on other smaller Spanish language broadcasters as well.
Entravision, which owns more than 50 Spanish language radio stations, a billboard business and TV stations that are affiliated with the Univision network, could be an interesting acquisition target for whoever winds up purchasing Univision, said Marla Backer, an analyst with Soleil – Research Associates.
"It is interesting since Entravision accounts for about 25 percent of the distribution of Univision. I'm not sure if there is a compelling need for someone to buy them now, but it could be an interesting tuck-in deal for whatever party buys Univision," she said.
However, antitrust concerns could put a snag on such a deal. Univision actually just sold a portion of its Entravision stake back to the company as part of an agreement struck with the Department of Justice after Univision bought Hispanic Broadcasting Corp., an Entravision competitor, in 2003.
Remek said Clear Channel might also be interested in Spanish Broadcasting System, which operates 20 radio stations in the U.S. and recently announced that it was launching a television station in South Florida.
The company reported a fiscal fourth quarter loss Thursday and Remek, said some investors are concerned about how much money Spanish Broadcasting is spending on its television strategy.
But he thinks these fears are overdone and that in addition to Clear Channel, CBS, which owns a large radio and billboard business, might also be interested in Spanish Broadcasting. In fact, CBS (Research) already owns a 10 percent stake in the company.
"There is some attraction because Spanish Broadcasting has market leading radio stations in New York, Los Angeles and Miami," said Remek. "CBS and Clear Channel both have interest in increasing their Spanish language business."
Kit Spring, an analyst with Stifel Nicolaus, also said both Entravision and Spanish Broadcasting could be attractive to a larger media firm. However, he thinks each company would prefer to remain independent.
"These companies could definitely be sold if they so chose. Both companies will continue to outpace the English language media sector on a revenue basis. But I doubt that either management team wants to sell," Spring said.
Of course, that could change quickly if Univision is bought. Analysts said that there are only a handful of viable Spanish-language media companies out there that would be attractive to companies such as News Corp, CBS or Time Warner.
Backer said that in addition to Entravision and Spanish Broadcasting, one wild card is privately held Liberman Broadcasting, which owns Spanish-language radio and TV stations in California and Texas.
Liberman filed to go public in 2004 but wound up not going through with an initial public offering.
Univision is ready for its closeup. Click here.
For a look at how Univision hopes to cash in on the World Cup, click here.
Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking relationships with the companies.