Spanish industry waits to see what's on shopping list

MADRID — Vocento, a formerly stolid regional press group, is prepping a buying spree in Spanish film and TV, drawing on a war chest of north of $500 million in cash and credit.

During the week of Nov. 6 Vocento will free-float 20% of its stock in the first initial public offering of a major local media company in two years.

Analysts are generally bullish. Vocento’s stock price has been set cautiously at e14.40 ($18) to $21, which values Vocento at $2.25 billion to $2.625 billion.

“It’s a small free float: It should be easy for the market to absorb,” says Javier Marin at Morgan Stanley. “Also, the regional press is a high-quality asset. It’s slightly more resilient to the cycle than the national press.”

But exactly how Vocento will spend that cash has industryites scratching their heads.

Its challenge remains familiar: How to drum real value from its newish media assets while pulling out of slowly failing print media.

Vocento has already bought some best buys. In 1996, prexy Alejandro Echeverria made the deal of a lifetime, purchasing a 25% stake in the then-restructuring terrestrial web Telecinco. Since 2000, it’s bought Europroducciones outright and owns 70% of BocaBoca and 30% of Videomedia, Spain’s three top TV producers.

In June it paid $63.8 million for 60% of indie film distrib TriPictures, beating rival film/TV group Telson.

Vocento’s other assets include 51 local TV stations, digital terrestrial television operator Net TV, radio chain Punto Radio and loss-making national daily paper ABC.

Vocento posted first-half net operating profits of $83.75 million from $540.8 million in sales.

Advantages of ownership by Vocento are clear.

As B.O. turns increasingly around tentpoles, a Vocento-backed TriPictures “has financial muscle to increase business volume,” says TriPictures prexy Luis Ortiz. DVD releases can be promoted by the local press or packaged with newspapers in kiosk sales, he adds.

It should be relatively easy to migrate advertising from regional newspapers to other green-field operations such as local TV.

Vocento’s ownership of the three top TV producers will strengthen its hand when bargaining to retain rights with broadcasters facing an increasingly fragmented market. Some 1,800 TV stations are expected to operate shortly in Spain.

“More operators will demand more content at a lower price. The challenge for content producers will be to make low-cost programs generating viewers and profits,” Vocento sources claim.

That’s right on the money, everybody agrees. But cheap content leveraging has yet to take off. Local TV licenses haven’t been officially granted and Spain’s analog switchoff likely will be pushed back beyond 2010.

One thing’s certain: As the media drool over Vocento’s cash, a host of indies are quietly putting up for-sale signs.

Vocento’s in no hurry to buy, CEO Jose Maria Bergareche says. But Spain’s cash-needy indie sector is in a considerable rush to sell.

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