Sunday, March 12, 2006

Univision Gets Closer to Deal

Shares of Univision (UVN) popped $1.26 on Friday after reports emerged that a group of private-equity investors and key Univision shareholder Grupo Televisa were considering making a bid for the Spanish-language media conglomerate.

You'll remember the story on Univision we printed last Saturday:
Investors wondering how to play the torrid growth of the Hispanic American demographic can do little wrong by turning to Spanish media collossus Univision. In an 8-K filed earlier last month, Univision said it was putting itself up for sale. We'd like to see GE come in an acquire it (GE already owns UVN rival Telemundo), but Univision partner Televisa will most likely bid and win.Univision holds an attractive portfolio of assets (radio, internet, and TV programming), and its penetration in Spanish-speaking households is truly to die for.

Besides its massive market share, Univision still has tremendous growth ahead of it. The US Census Bureau thinks Hispanic Americans will number 66 million by 2022 -- impressive in and of itself, but even more alarming when coupled with the fact that consumer spending among Hispanic Americans is growing faster than any other segment of the population. Global Insight estimates that Hispanic consumer expenditures will more than double from $456 billion in 2000 to over $985 billion in 2010. One way Univision has been increasing customer captivity is via broadband: we like the prospects for the company's nascent internet business, still a young, virgin market we are very bullish on.

In a word, demographic changes favor the Hispanic segment and we greatly anticipate that Hispanic broadcasters will continue to grow faster than the rest of the industry. Univision has a vise grip on eyeball count. We feel advertisers looking to tap into this segment's mushrooming purchasing power will inevitably pay top dollar. Patient investors can capitalize on this trend, as well as enjoy the upside Univision shares will see once the firm gets swallowed.
We expect that Univision will trade north of $40 when all is said and done.

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