Two companies forming one Univision

By Michelle Rama, Associated Press, 4/15/2003 00:43

NEW YORK (Dow Jones/AP) Univision Communications Inc.'s television channel is an institution to the Spanish-speaking population in the United States and Hispanic Broadcasting Corp. is the country's largest Spanish-language radio broadcaster.

So a merger of the two seemed a natural fit the largest media company serving a demographic that is growing faster than the rest of the population.

But while most analysts like the deal, investors have been slow to warm up to it. The problems cited most often include antitrust issues and dilution concerns along with the same economic climate other media companies face.

Los Angeles-based Univision's shares have fallen about 33 percent since June, when it agreed to acquire Dallas-based Hispanic broadcasting in a stock swap then valued at about $3.5 billion.

Instead of gaining from the proposed merger both companies have followed the general pattern of media stocks, hurt by advertising concerns.

Univision closed Monday at $26.61, up 92 cents. The shares hit a 52-week low of $16.40 on Aug. 8 and a 52-week high of $44.89 last April 16.

Hispanic Broadcasting, with 63 radio stations in 15 of the top 25 Hispanic markets and a network of bilingual Web sites, saw its stock rally after the merger announcement, then begin to seesaw. It closed Monday at $22.35, up 55 cents, or 2.5 percent. Its 52-week low of $13.80 was hit August 8, while a 52-week high of $30.15 was reached last April 19.

Analysts favoring the deal point to the cross-promotion possibilities in the merged company.

Not only can the company promote its TV programs on radio and vice versa in local markets, said Anthony Valencia, analyst at TCW Group, a Los Angeles-based institutional investment management firm, but it can offer advertising packages.

''There's an expertise in marrying (the leading) Hispanic TV company with the leading Spanish radio company that's different than buying an English-speaking company. They know how to sell Hispanic advertising,'' Valencia said.

The growing Latin demographic gives Univision a natural advantage over other media companies.

''General media doesn't have a growing population, (so) they're all fighting for the same pie,'' CIBC World Markets analyst Jason Helfstein said. ''Even if you lose share, as long as you don't lose more share than the increase in the Spanish population, you're still doing OK.''

Another advantage for Univision is that it has the exclusive right to show Venezuela's Venevision and Mexico's Televisa programming through 2017.

''Essentially the programming from these two entities, specifically Televisa, is really considered the gold standard the best programming in Latin America and basically Univision has it completely locked up,'' Valencia said.

Television accounts for about 93 percent of Univision's net revenue, with music operations, 6 percent, and Univision Online, 1 percent, making up the rest.

Univision's progress toward the acquisition originally slated for a March 14 closing hit a snag when authorities requested more information and time to review the proposed buy for anticompetitive advantages.

The Department of Justice has since required Univision to sell ''a significant portion'' of its partial ownership in Entravision Communications Corp. before it can proceed with the $3 billion deal.