Investopedia Advisor submits: Individual investors who are debating whether or not to buy, sell or hold Univision (UVN), must be wondering if the preeminent Spanish language broadcaster is headed towards a prosperous future or a prolonged siesta.
Univision’s board of directors accepted a $12 billion cash offering from a cohort of private equity firms on June 27. The investment group includes Madison Dearborn Capital Partners, Saban Capital Group, Providence Equity Partners, Texas Pacific Group and Thomas H. Lee Partners, which formed Umbrella Holdings LLC to carry out the transaction.
Univision shareholders who have enjoyed the privilege of ownership may lose the right to participate in the future success of the company if the merger is approved.
Major Univision common stock shareholders, including the investment banking firm Goldman Sachs and hedge fund firm Citadel (each owning more than 5% of Univision common stock), have not made a mad dash to the trading block to sell their investment in Univision.
The logical course of action is for major and individual shareholders to hold on to their shares until the probable cash payout is dispersed on or after the April 26, 2007 target date for the conclusion of the merger.
If the deal goes through as planned, Univision stock will be delisted from the NYSE and shareholders will receive the $36.25 per share consideration as the new owners grab the reigns and attempt to turn the Spanish media giant into a profitable investment vehicle.
Univision common stock shareholders can expect some combination of management restructuring, a subsequent IPO, or an eventual sale of the Spanish media giant to another company or consortium.
In the interim, a possible move for the private equity firms could entail a special dividend payment similar to the cash-out financing that the acquirers of Hertz, including the Carlyle Group, Clayton, Dubilier & Rice, and Merrill Lynch (MER), used to recoup $1 billion worth of their investment in early July of this year. The special dividend payment allows the owners of the firm to issue new debt that is backed by the cash flow of the acquired firm.
Univision has also been the subject of litigation as Group Televisa (TV), the primary content provider for Univision, has sued the company over internet broadcasting rights and other programming-related issues over the past 12 months.
Despite these issues Televisa, Univision’s primary content provider and an 11% common stock owner, will continue to provide content through 2017.
The new owners of the Univision brand must balance the constraints of improving the business with the broadcasters’ freedom of cultural expression. The strength of the culture was evident in Univision reporting a nearly 25% improvement in revenue for the second quarter, driven largely by World Cup Soccer ratings.
Despite the recent volatility in the market, Univision has maintained a stock price in the $33 range, which is up nearly 14% from the beginning of the year. Given its pending merger and its ongoing legal battles, it’s important to realize there is no direct competitor for Univision who offers its mixture of cable, radio, recording and Internet broadcasting mix.
The individual investor should stay on top of broad market drivers while researching companies such as Univision that are leading the way by serving exploding marketplaces. While Smart Money is said to move quickly and early, Univision’s eventual rise to its fair offering price suggests that even late comers still have a chance to tune in.
UVN 1-year chart:
By Gregory S. Davis, Contributor - Investopedia Advisor
At the time of release Gregory Davis did not own any shares in any of the companies mentioned in this article.