Seeking Alpha
Recommended for you:
Research analyst, growth, value, IPOs
Profile| Send Message|
( followers)  

Summary

  • Grupo Televisa owns 38% of Univision.
  • New regulation worries overblown with growth of television market in Mexico and growing Hispanic population in United States.
  • World Cup viewership boosting valuation of Univision and provides great bartering room in bidding war.

Shares of Grupo Televisa (NYSE:TV) have been shooting up, as the company continues to dominate the Mexican television market. Changes to competition in Mexico once had the company on a down trend, but those fears have now dropped. With the upcoming catalyst of a Univision IPO or sale, shares of Groupo Televisa have more room to run.

Reports say Univision has approached CBS and Time Warner (NYSE:TWX) about a possible sale in the $20 billion range. Univision is a highly targeted asset in the television market, with its dominant position in Mexico and in parts of the United States. The company has 16 networks, including Fusion, a partnership with ABC, and El Rey Network, a new channel from director Robert Rodriguez.

A Univision sale or IPO in 2014 is highly likely and would capitalize on the strength of the World Cup. The tournament, which started Thursday is seeing strong numbers for Univision. The group stage through Saturday was the highest watched in Univision Deportes history. Through eight matches, ratings are 25% higher, including an 11% increase in the 18-49 key demographic. The Mexico vs. Cameroon match had an average of 5 million viewers, including a 2.6 million average for the 18-49 age demographic. Throughout the match, over 9.2 million viewers tuned into the game. ESPN2, which also aired the game, had an average of only 2.1 million viewers.

Amazingly enough, Univision Deportes is outdelivering ESPN and ABC by over 7%. Univision Deportes had number one ratings in key cities like Los Angeles, New York, Miami, Houston, Dallas, Chicago, San Francisco, and Phoenix. A strong run by Mexico could see record viewership for Univision Deportes, boosting a possible valuation in a potential sale of Univision.

After the World Cup, Univision will also have key soccer matches televised, which will strengthen ratings and show the valuable assets in rights deals. Univision has the Spanish rights to the Copa America Centenario in the Summer of 2016. Univision also has a new television deal with Major League Soccer.

Signed in May, Univision partnered with ESPN and Fox Sports in a huge television deal for soccer in the United States. As part of the eight year deal, Univision gets an exclusive Friday night game of the week and will also air a wrap up show of the league on Sundays. As part of the deal, Univision is also the exclusive Spanish language home of U.S. soccer games. Under the deal, Univision will air a minimum 34 regular season games (some exclusive, some Spanish rights), 2 MLS Cup Playoff games (exclusive), All-Star Game (Spanish rights), and MLS Cup (Spanish rights).

Going forward, Univision also has the rights to air the World Cup in Mexico in 2018 and 2022. Some of these games are also exclusive. Univision also has the exclusive rights to the 2016 Summer Olympics in Mexico. Despite the new rules by Mexican regulators, Univision is able to keep these already signed deals.

Univision had a strong 2013, which was pointed out by this Barron's article. The channel even ranked ahead of NBC in the key 18-34 age demographic. With Hispanics making up 17% of the United States population, Univision is fast becoming a key stock for investors to get exposure to Mexico and the Mexican population here in the states. Univision posted revenue of $2.62 billion and a profit of $428 million in 2013.

In May, Univision was the number three broadcast network, beating both Fox and CBS in ratings for adults in the coveted 18-34 age demographic. On Thursday and Friday nights, Univision was the number one network for people aged 18-34.

The biggest worry around Grupo Televisa is Mexican regulations fighting the company's near monopoly in the country. Grupo Televisa was ordered to share its infrastructure with rivals to increase competition in the broadcasting markets. This was a potential big blow for the company, but with growing television viewership in Mexico and an increasing dominant position in the U.S. Hispanic market, competition won't kill Televisa.

Aside from Univision and the company's main business, Grupo Televisa also has stakes in other companies:

· 50% ownership of Cablevision, Mexico's largest operator of digital telecommunications. The company has 640,000 digital television subscribers, 250,000 high speed internet subscribers and 140,000 phone subscribers

· Cablemas, the number two cable television company in Mexico, reaches 1.1 million homes

· Ownership of Club America and Necaxa, two professional soccer teams

· Largest magazine importer in Mexico

Grupo Televisa remains in a dominant position in Mexico and its stake in Univision places it in a stronghold in the United States as well. A sale or IPO of Univision will unlock substantial value by bringing in cash or realizing a higher value of the company's assets. Univision was taken private in 2007, but 38% is owned by Grupo Televisa. With current estimates calling for a valuation of $20 billion for Univision, Grupo Televisa's stake is worth $7.6 billion.

Shares of Grupo Televisa trade near 52 week highs. The company has a market capitalization of around $20 billion. The company's stake in Univision could be worth around $6 to $8 billion, depending on a potential sale or IPO valuation. The company has strong television, phone, and cable assets. Grupo Televisa could see shares rise on a bidding war for Univision or an IPO, which could be well received by investors and actually command a higher valuation. The timing of the World Cup is a perfect time for Grupo Televisa to boost its value of this strong asset.

Source: Univision's Strong World Cup And Potential Sale To Provide Boost For Grupo Televisa