Univision and Viacom?

Is Univision Communications (UVN ), No. 1 in Spanish-language TV in the U.S., being pursued by Viacom (VIA )? Ever since NBC (GE ) agreed to buy No. 2 Telemundo on Oct. 11, speculation has swirled that Univision would be next. Shares of Univision jumped sharply, to 28, when the NBC-Telemundo deal was announced. Of late, the stock has again attracted some buying: The buzz on Univision has zeroed in on one possible buyer--Viacom, the giant media and entertainment company that also owns CBS.

One big Univision shareholder says that there have been talks between the two but that disagreement on price blocked any merger deal. This investor says Univision CEO Jerrold Perenchio, 70, who owns 18% of the stock and 69% of the voting stock, has confided to friends that he may be more amenable to a deal now. But he won't be inclined to sell at below 50 a share, says this source. Nevertheless, a deal is still very much a possibility. Viacom indicated in May that it wanted to own a Spanish network. Univision reaches 93% of Hispanic households.

"There's no doubt that Univision is a perfect fit for Viacom," says Timothy Wallace of Banc of America Securities, who rates the stock a strong buy solely on fundamentals. He thinks Viacom CEO Sumner Redstone and President Mel Karmazin both want to own premium assets such as Univision. "I'm very bullish on Univision, which has a market share of 85% in the fastest-growing part of the industry," says Wallace. The Telemundo sale validates the Hispanic market's importance and Univision's value, he adds. If you assume a 20%-to-30% premium valuation for Univision (based on Telemundo's deal), it implies a price of 40 a share or about $10.8 billion, he says. Viacom and Univision declined comment.

By Gene G. Marcial

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