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Viva La TV!
While debates and arguments about immigration often dominate any conversation about the growing influence of Spanish-speakers in the United States, the reality is that the Spanish-speaking market is major growth market today. With that in mind, Grupo Televisa's (NYSE:TV) recent deal with Univision looks like a classic win-win deal for both parties.
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The Deal
On Tuesday, Televisa announced a $1.2 billion deal with Univision that will further solidify the long-term relationship between these often fractious partners. With the deal, Televisa will get a 5% equity stake in Univision and debentures that can be converted into a further 30% piece of Univision. This is not the first time that Televisa has had an ownership stake in the largest distributor of its programming - prior to Univision's acquisition by private equity, Televisa was a minority investor.
Along with the ownership stake, Televisa is getting an extended royalty agreement that could stretch out to 2025. This gives Univision exclusive access to Televisa's content, in particular the telenovelas that are so popular and largely responsible for Univision often beating The CW - which is co-owned by CBS Corporation (NYSE:CBS) and Time Warner (NYSE:TWX) - in primetime ratings. Not only does this deal put more years under guarantee, but it also will give Televisa significantly higher royalty rates for its programming.
A Lot of Oars in the Water
Televisa's U.S. presence is pretty much just that of content provider to Univision, but in Mexico it is also an owner and operator of TV stations and pay TV services. Not content to just be a content provider, though, Televisa is looking to move into the Mexican wireless market with a stake in NII Holdings (Nasdaq:NIHD). With Dish Network (Nasdaq:DISH) becoming more of a threat in the Mexican pay TV business, diversification makes a certain amount of sense, though the cell phone business is extremely tough.
The Bottom Line
As it stands now, Latin American and South American media companies do not get a lot of attention. Companies like Televisa and Net Servicos (Nasdaq:NETC) do not enjoy very robust multiples, even though there is solid double-digit growth today and prospects for ongoing growth as these economies produce better standards of living in the local markets. By the same token, it is not as though the likes of Disney (NYSE:DIS) or Comcast (Nasdaq: CMCSA) are enjoying booming investor sentiment either, as the weak economy keeps a lid on advertising revenue.
Televisa looks like a middling stock idea - the valuation is not demanding and the shares seem a bit undervalued, but the company is taking on some serious competition if it goes into Mexican wireless, and Mexican pay TV also seems to be getting tougher. Still, that eventual one-third ownership stake in Univision might be worth a lot more in the next few years, and investors should probably keep an eye on this stock from time to time. (For related reading, take a look at Playing It Safe In Foreign Stock Markets.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: Retire A Millionaire In 10 Steps
The Deal
On Tuesday, Televisa announced a $1.2 billion deal with Univision that will further solidify the long-term relationship between these often fractious partners. With the deal, Televisa will get a 5% equity stake in Univision and debentures that can be converted into a further 30% piece of Univision. This is not the first time that Televisa has had an ownership stake in the largest distributor of its programming - prior to Univision's acquisition by private equity, Televisa was a minority investor.
Along with the ownership stake, Televisa is getting an extended royalty agreement that could stretch out to 2025. This gives Univision exclusive access to Televisa's content, in particular the telenovelas that are so popular and largely responsible for Univision often beating The CW - which is co-owned by CBS Corporation (NYSE:CBS) and Time Warner (NYSE:TWX) - in primetime ratings. Not only does this deal put more years under guarantee, but it also will give Televisa significantly higher royalty rates for its programming.
Televisa's U.S. presence is pretty much just that of content provider to Univision, but in Mexico it is also an owner and operator of TV stations and pay TV services. Not content to just be a content provider, though, Televisa is looking to move into the Mexican wireless market with a stake in NII Holdings (Nasdaq:NIHD). With Dish Network (Nasdaq:DISH) becoming more of a threat in the Mexican pay TV business, diversification makes a certain amount of sense, though the cell phone business is extremely tough.
The Bottom Line
As it stands now, Latin American and South American media companies do not get a lot of attention. Companies like Televisa and Net Servicos (Nasdaq:NETC) do not enjoy very robust multiples, even though there is solid double-digit growth today and prospects for ongoing growth as these economies produce better standards of living in the local markets. By the same token, it is not as though the likes of Disney (NYSE:DIS) or Comcast (Nasdaq: CMCSA) are enjoying booming investor sentiment either, as the weak economy keeps a lid on advertising revenue.
Televisa looks like a middling stock idea - the valuation is not demanding and the shares seem a bit undervalued, but the company is taking on some serious competition if it goes into Mexican wireless, and Mexican pay TV also seems to be getting tougher. Still, that eventual one-third ownership stake in Univision might be worth a lot more in the next few years, and investors should probably keep an eye on this stock from time to time. (For related reading, take a look at Playing It Safe In Foreign Stock Markets.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Stephen D. Simpson, CFA
Stephen D. Simpson, CFA, is a freelance financial writer, investor, and consultant. He has worked as an equity analyst for both sell-side and buy-side investment companies in both equities and fixed income. Stephen's consulting work has focused primarily upon the healthcare sector, while he has also written extensively for publication on topics pertaining to investments, security analysis, and healthcare. Simpson operates the Kratisto Investing blog, and can be reached there.
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