What's Univision Worth? A Lot More Now

NBC paid a premium $2.6 billion for Telemundo, the Hispanic broadcaster's smaller rival, which means bidders may have to up the ante

By Ronald Grover

Media moguls seem to live for the day when they will have the hottest property in town. Today, the guy clutching the goods would seem to be a 70-year-old former Air Force flight instructor who helped promote the 1971 heavyweight fight between Muhammad Ali and Joe Frazier.

Odds are you've never heard of Jerry Perenchio, chairman of Univision Communications, the Hispanic media company that very well may be the only media outfit experiencing hot growth these days. Univision is the Los Angeles-based parent of the giant Univision Spanish-language TV network, which this year has recorded a none-too-shabby 10% hike in ad bookings for the season that started in September.

Perenchio, who owns 18% of Univision, is one popular guy -- especially in the wake of the Oct. 11 announcement that General Electric's NBC network is buying Univision's much smaller competitor, Telemundo, for $2.6 billion in cash and assumption of debt. Telemundo has about 20% of the U.S. Hispanic TV audience tuning into its own diet of novella soap operas and south-of-the-border news. But it's no Univision, which is dominant in a marketplace of 35 million Hispanic viewers.

According to the most recent U.S. Census, Hispanics account for 13% of the country's population and, within a decade, will likely make up one-third. In all, Hispanics are said to represent some $500 billion worth of consumer buying power.


  The Telemundo deal will only make Perenchio's Univision operation that much more valuable. Univision is valued at $5.5 billion by Wall Street -- and that includes the 7% jump that occured on the day the NBC-Telemundo deal was announced. Add $865 million in debt and Univision would be valued at nearly $6.4 billion, a figure likely to get left in the dust by the time Perenchio is finished with whatever major media company is likely to come calling on him in the next few weeks. I figure this is an $8 billion purchase for someone, maybe Viacom's Sumner Redstone or the posse at AOL Time Warner.

That's a lot of dollars for a guy who entered the Hispanic market almost as an afterthought. Heck, Perenchio doesn't even speak Spanish. But back in 1992, he sensed an opportunity in a little-known backwater of the U.S. media market. At the time, Perenchio was fresh off a slam-dunk deal that saw Embassy Communications -- the company that held Norman Lear's shows All in the Family and Maude -- go to Coca-Cola for $485 million.

Perenchio had been a talent agent, with a client list that included Elizabeth Taylor as well as singers Sergio Mendes and Jose Feliciano. He also owned a small Spanish-language TV station, Channel 47 in New York. When Hallmark Cards put its struggling chain of five Univision TV stations on the block, Perenchio bought them for $550 million, of which he himself invested $33.5 million.


  The key to that deal was Perenchio's partners, Mexican TV production company Televisa and Venezuela's Venevision. Univision controlled most of the Spanish-language novellas, variety shows, and movies that were being seen in the U.S. That helped him increase Univision's market share from around 60% to more than 90%.

Perenchio today controls a media empire that owns 19 TV stations and has plans to buy 11 more. Univision also owns the largest Hispanic cable-TV channel and an up-and-coming Hispanic music company. In January, Univision will use the 11 new stations, bought from Barry Diller's USA Networks for $1.1 billion, to launch Telefutura, an English-language cable network aimed at the bilingual Hispanic population.

In a media world that is fracturing among hundreds of cable channels and the Internet, anything that can bring so many eyeballs to the screen is a very valuable commodity. In the season just ended, 24 of the 25 highest-rated TV shows in Hispanic households were on Univision. The exception was the NBA finals on NBC, which was No. 24.


  Small wonder, then, that advertisers literally line up to do business with Univision. For the season that started in September, Univision signed deals for $550 million in upfront ads, a $49 million increase at a time when most other networks and cable channels are seeing double-digit declines.

Small wonder, too, that Perenchio thinks he can name his own price. Earlier this year, when Univision's stock was trading at around $49, Perenchio turned down a bid from Viacom in the $55 range, which would have put Univision's value in the area of $12 billion. At the time, Perenchio held out for more than $60 a share, according to sources.


  Since then, Univision's stock has fallen to the $26 range, as it has felt the impact, along with other media companies, of the decline in ad revenues. For the coming year, Univision is expected to report sales of $1.7 billion, says Merrill Lynch analyst Jessica Reif Cohen, up 21% from this year but still 8% off Cohen's earlier projection. Univision is expected to show cash flow of $360 million, up 10% from a year earlier, Cohen says.

The word around town is that Perenchio is still holding out for a steep price, but watch for a deal of around $8 billion. Given Telemundo's $2.6 billion price tag and the fact that it's one-third the size of Univision, $8 billion might not be so unthinkable. Indeed, Univision may well be worth that much as the last independent Hispanic media company of any size still standing.

Yes, it's fun to be popular.

Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BW Online

Edited by Patricia O'Connell

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