Televisa to Gain Significantly from Univision Investment - Analyst Blog

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Mexican pay-TV and broadcasting behemoth, Grupo Televisa S.A.B. ( TV ), is likely to gain significantly from its ownership stake in the U.S. broadcaster Univision Communications Inc. Privately held Univision is the largest Spanish-language broadcaster in the U.S.

Recently Univision together with ESPN of The Walt Disney Co. ( DIS ), received a shot in the arm with its impressive broadcasting performance of the just concluded 2014 FIFA World Cup Football Tournament. Univision's viewers increased nearly 60% during the soccer tournament.  Notably, Univision's closest competitor is the Telmundo TV channel owned by Comcast.

Currently, Televisa effectively holds a 38% (after converting debt into equity) stake in Univison. This leaves scope for another 2% stake buy over the next three years. The existing U.S. regulation denies any foreign company to control more than 25% stake in any U.S. broadcaster. However, the Federal Communications Commission has the right to allow exemptions in select cases. 

At present, the owners of Univision are exploring strategic options to sell the company and may also consider an initial public offering (IPO) in the next year. Univision's owners have held talks with CBS Corp. ( CBS ) and Time Warner Inc. ( TWX ) in this regard. However, nothing concrete has emerged so far.

In 2007, Univision was acquired by a consortium led by billionaire Haim Saban for a total consideration of $13.7 billion. Other investors were Madison Dearborn Partners, Providence Equity Partners, TPG and THL Partners. According to industry rumors, management is expecting more than $20 billion from the Univision sale. Consequently, Televisa is positioned to gain significantly from the sale.

Currently, a considerable share of Televisa's income is generated from its U.S. operations, which includes the sale of content, website and cable TV services. Televisa allows Univision to access its content and then rebroadcast it on TV and the Internet for a royalty.

The U.S. Hispanic TV market is highly lucrative and is growing at a remarkable pace. In the second quarter of 2014, Televisa's royalty from Univision was a record-high $84 million, up 19.1% year over year.  Televisa currently carries a Zacks Rank #3 (Hold).


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