Univision to Acquire Hispanic Broadcasting

Univision Communications Inc. is acquiring the nation’s largest Spanish-language radio network, Dallas-based Hispanic Broadcasting Corp., in a $3.5-billion stock deal that would round out its portfolio as a media conglomerate, sources close to the transaction said Tuesday.

Los Angeles-based Univision commands more than 70% of the Spanish-language TV market and owns three record labels but before this deal had no voice in radio. Hispanic Broadcasting owns 55 radio stations, including five in Los Angeles, the nation’s largest Latino market.

The deal, which could be announced as early as today, bolsters the company’s growing music division by giving Univision artists valuable exposure and air time on popular radio stations in the nation’s top Latino markets.

“Now Univision can truly be a one-stop shop,” said a source close to the deal who asked not to be identified.

“There’s no other Spanish-language company that offers this range of media platforms.”

Univision executives declined to comment. Hispanic Broadcasting executives could not be reached late Tuesday.

The proposed purchase price carries a premium of more than 25% above Hispanic Broadcasting’s market value of $2.6 billion. Hispanic Broadcasting shares closed at $24.45, up 70 cents, on the New York Stock Exchange.

Univision shares closed at $37.70, down $1.35, on the NYSE.

Under terms of the acquisition, which should close by the end of the year, Hispanic Broadcasting shares will be exchanged for .85 shares of Univision common stock.

Shareholders for both companies must approve the deal, but approval is probable because Univision Chairman A. Jerrold Perenchio controls more than 60% of Univision’s voting stock.

Meanwhile, Hispanic Broadcasting’s two largest shareholders, radio giant Clear Channel Communications Inc. of San Antonio and the family of Hispanic Broadcasting Chairman and Chief Executive McHenry Tichenor Jr., have pledged to vote for the deal, according to a source.

Hispanic Broadcasting, which has more than 1,100 employees, will be renamed Univision Radio and its headquarters will remain in Dallas with Tichenor staying on to head up the new division.

Hispanic Broadcasting has five radio stations in Los Angeles: news and talk station KTNQ-AM (1020); regional music station KSCA-FM (101.9); adult contemporary station KLVE-FM (107.5); and two Spanish oldies stations: KRCD-FM (98.3) and KRCV-FM (103.9). The acquisition will give Univision overlapping media properties in the nation’s top 10 Latino markets. Univision will control the No. 1 Spanish-language TV station and No. 1 Spanish-language radio stations in Los Angeles, Miami and Houston. And in New York and Chicago, the nation’s other large Latino markets, Univision will own the No. 1 TV station and the No. 2 radio station.

The acquisition also will give Univision more reach on the Internet. Although Univision has the leading Spanish-language Web site, Univision.com, Hispanic Broadcasting runs its own network of community focused bilingual Web sites called Netmio.com.

Univision’s last major acquisition came in December, when the company purchased Los Angeles-based record label Fonovisa in a $240-million stock deal with Mexico’s Grupo Televisa.

Since then, the company has been looking for new platforms to promote the label’s musicians including music video programs on TV.

Univision owns more than 50 television stations and in January launched its second broadcast network, TeleFutura, built with more than 13 USA Broadcasting stations that Univision acquired from Barry Diller’s company for $1.1 billion. The company also manages a cable channel, Galavision.

Univision expects the deal to contribute to cash flow in the first year after the acquisition, according to the source. Existing Univision shareholders would hold 73.5% of the company’s shares after the merger and Hispanic Broadcasting shareholders 26.5%