Spanish Broadcaster Open for Bidding
Univision Offers a Prized Market Segment

By Steven Levingston, Ben White and Krissah Williams
Washington Post Staff Writers
Thursday, February 9, 2006

Univision Communications Inc., the largest Spanish-language TV broadcaster in the United States, announced yesterday that it has put itself up for sale at a time when analysts believe its market strength will deliver top dollar.

Univision, a powerhouse that reaches 98 percent of Hispanic households, expects to draw interest from several big media companies including Rupert Murdoch's News Corp., CBS Corp., Time Warner Inc., Walt Disney Co., Comcast and others. Large private equity firms also are likely to consider joining forces on a bid for Univision, according to sources familiar with the plan for the sale who spoke on condition of anonymity because they were not authorized by the company to speak on its behalf.

The Spanish-language giant delivers a concentrated TV audience with growing consumer clout in an era when viewers are scattering away from television to other media. The company, which operates 62 television stations, also has a strong presence in cable, radio and the Internet.

"I can see why this will be very attractive -- it is quite a set of marbles to have in the playground," said Alex Lopez Negrete, chairman of the Association of Hispanic Advertising Agencies and chief executive of Lopez Negrete Communications in Houston.

People close to the plan said they expect an auction process, which will be run by investment bank UBS, to last at least several months. They said a sale is likely but could fall apart if Univision's board or A. Jerrold Perenchio, 75, the company's chief executive and controlling shareholder, decides the highest bid is not high enough. The company said in a statement that it would not discuss developments and did not return phone calls seeking further comment.

Hispanic advocacy groups expressed concern yesterday about the potential transfer of a Spanish-language company into the hands of a traditional American media organization. "Our polling does show that Hispanic media consumers view Spanish media as a more reliable barometer and a more accurate reflection than what is shown on mainstream media," said Thomas Oliver, executive director of the Washington-based National Association of Hispanic Publications.

Hispanics rely more than ever on Spanish-language media for news, said John Trasvina, senior vice president for law and policy at the Mexican American Legal Defense and Educational Fund in Los Angeles. Trasvina said the fund will monitor any potential sale as it undergoes the scrutiny of federal regulators.

"Any future acquirer of this precious community asset should ensure that Univision's role in the growing Latino community is maintained and expanded," he said.

In 2001, NBC bought the nation's second largest Spanish-language broadcaster, Telemundo. Lisa Navarrete, spokesman for National Council of La Raza, one of the nation's largest Hispanic civil rights and advocacy groups, said the merger has allowed Telemundo access to NBC resources and has helped the broadcaster beef up its news and public affairs programming.

Univision traces its history to 1961 when a Mexican entrepreneur founded a Spanish-language TV station in San Antonio. In the late 1980s, greeting card company Hallmark Inc. bought the company, beating out U.S. Hispanic investors. Perenchio and his partners bought the company from Hallmark in 1992.

"Perenchio is a wealthy investor that looks for good investments," said Carlos Santiago, owner of Santiago Solutions Group of Los Angeles and a Hispanic media researcher. Santiago doesn't believe any suitor -- whether Hispanic or not -- would "change the individuality of Univision and the role it plays in the Latino community."

Mexican media giant Grupo Televisa SA could emerge as a serious bidder, sources said. Televisa provides much of Univision's programming, including many of its popular prime-time telenovelas. The programming deal lasts until 2017. Sources close to Univision say that the rights to air Televisa programming would transfer to whoever buys Univision. But Televisa has filed suit against Univision saying Univision violated the program licensing agreement between the two companies. Sources said Televisa could use its lawsuit as a way to discourage other potential Univision buyers.

If Televisa bids for Univision, it would have to do so with a U.S. partner, probably a private equity firm, because U.S. law forbids foreign firms from owning more than 25 percent of a domestic broadcaster. A source close to Univision said he expected that either CBS or NewsCorp. would be much more likely bidders than Disney, Comcast or Time Warner, which is currently embroiled in shareholder battle with investor Carl Icahn.

CBS or NewsCorp. could face hurdles from the Federal Communication Commission. A broadcaster cannot own more than two television stations in a local market or penetrate more than 39 percent of the U.S. market. CBS, for instance, already owns two stations in Los Angeles while Univision also has two stations in the city. A deal between the two companies would require sales of stations to win approval by the FCC. CBS declined to comment on its intentions.

Mark Fratrik, a media analyst at Chantilly-based BIA Financial Network Inc., said that given Univision's strong position in its market, it is a good time to capitalize on its assets. But, he added, "I'm a little wary about who can actually buy the company. It's possible to ask for waiver from the FCC, but that would be a tough battle."

Univision did not say what price it expects to fetch in the auction. But people close to the company say they expect it to sell for a significant premium over its closing price yesterday of $34.20 per share. These people said they expect a hefty premium because Univision is the only large media property left with such extensive reach into the increasingly large and affluent Hispanic community.

These sources said they expected the bidding to be competitive and to reach well over $40 per share. Wall Street also clearly expects a bidding war to emerge. Univision shares rose $3.66, or nearly 12 percent, yesterday after the New York Times reported a possible sale.

"They have a tremendous share of the viewing audience and their financial model is wildly profitable," said Lopez Negrete of the Association of Hispanic Advertising Agencies.