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Meruelo Media, buyer of KDAY, prizes L.A.'s diversity

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Near the intersection of Pico Boulevard and La Brea Avenue is a hodgepodge of Los Angeles culture, shared by Lucy's Mexican drive-in restaurant, Roscoe's House of Chicken and Waffles and an Asian nail salon.

It's now also home to a media upstart with ambitions to reflect the city's ethnic diversity.

Meruelo Media sprang to life 2 1/2 years ago with the acquisition of a pioneering Los Angeles Spanish-language TV station, KWHY Channel 22. Last month, Meruelo agreed to pay $15 million to buy another L.A. fixer-upper, radio station KDAY-FM (93.5).

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The acquisition has particular appeal for Alex Meruelo, principal of the parent company, Meruelo Group.

The son of Cuban immigrants started his career in the late 1970s running the tuxedo business in his parents' bridal shop on Broadway in downtown L.A., and he knew KDAY during its glory days when it was an early promoter of hip-hop music.

"I grew up listening to KDAY," said Meruelo, 51. "KDAY is part of L.A., and we think it could become a substantial radio station once again."

The station was once identified by its African American audience, but now more than half its listeners are Latino.

The rising importance of U.S. Latinos — more than 50 million strong, flexing a spending power that has been estimated at $1.3 trillion a year — has attracted media interest. Walt Disney Co., Comcast Corp. and Rupert Murdoch's 21st Century Fox have launched networks in the last 18 months to appeal to young Latinos. By some estimates, 50,000 U.S. Latinos turn 18 every month.

Those media owners are looking to Los Angeles because of the city's large population of Mexicans and Mexican Americans. Those groups make up about two-thirds of the Latinos in the United States.

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Enter Meruelo Group. The Downey holding company, which also has interests in construction, banking, real estate and a Nevada casino, has been on a mission to find and grow undervalued media assets.

"We are setting out to be the premier minority-owned media company in the U.S.," said Otto Padron, a former top Univision Communications programmer who moved to L.A. from Miami nearly two years ago to join Meruelo Media as its president and chief operating officer.

For years, Miami — not L.A. — has been the epicenter of Latino programming even though L.A. is the nation's largest Latino market. Miami is the home of network headquarters for the Spanish-language television giants Univision Communications and NBCUniversal's Telemundo.

Meruelo Media is hoping to carve out a lucrative niche by creating programming that feels more like Los Angeles. This week, after spending nearly a year and tens of millions dollars in renovations, the growing staff of Meruelo Media plans to move into its new broadcast center near Lucy's Drive-In and Roscoe's.

About 75 people are expected to work at Meruelo's center on Pico, a building formerly used by a Hollywood lighting company and as a rehearsal hall for the Los Angeles Philharmonic.

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Last week, TV producers, advertisers, business associates and local politicians gathered on Meruelo's soundstages to toast the arrival of Meruelo Media. Attendees snacked on products made by Meruelo Group companies, including sushi from its Fuji Food Products and thick-crust slices from La Pizza Loca.

Meruelo started his empire from scratch in 1986 by making pizza that would appeal to Latinos. Today, La Pizza Loca boasts about three dozen stores.

Meruelo also is controlling owner of Commercial Bank of California. His holding company has construction firms that specialize in utilities, pipelines and traffic signals. In 2011, his company acquired the 2,000-room Grand Sierra Resort and Casino in Reno.

There have been misfires. A deal to buy the Atlanta Hawks collapsed about two years ago. And Meruelo's $20-million bid to buy the Trump Plaza in Atlantic City, N.J., was rebuffed last year.

But last week, Meruelo told the group assembled at the building on Pico: "I'm living the dream. We've always wanted to have a voice in the community — a voice in Hispanic media."

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A major media merger gave Meruelo an opportunity. In approving Comcast's takeover of and NBCUniversal, the federal government required the cable giant to sell one of three NBC-owned TV stations in Los Angeles. Comcast was also being urged to do more to promote racial diversity in media.

Meruelo Group stepped up and bought KWHY-TV Channel 22 for less than $40 million — a whopping discount compared with the nearly $240 million paid in 2001 by Spanish-language broadcaster Telemundo.

"Meruelo Group had two main advantages: They were a minority buyer and they had the cash," said Julio Rumbaut, a Spanish-language media consultant in Miami.

According to Maria Boloori, director of media buying at Huntington Beach ad agency Grupo Gallegos, advertisers have been encouraged by the new management, including the hiring of Padron, who was a top programmer at Univision for many years.

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Meruelo Media also created a secondary channel, called Super 22, which broadcasts old Mexican movies and TV shows — which often does as well in the ratings as the primary KWHY station.

Another advantage is that KWHY runs its late local news at 10 p.m. rather than 11 p.m., and the newscast is gaining traction, Boloori said.

"In our market, we have a lot of blue-collar workers who have to start work early, so they go to bed early — but they will watch the news at 10," Boloori said.

KWHY also became the flagship station for MundoFox, the Spanish-language network that Fox launched 18 months ago.

"They were the first affiliates that we signed for MundoFox, and they've done a great job operating the stations," said Hernan Lopez, chief executive of Fox International Channels. Meruelo also manages a station in Houston that runs MundoFox programming.

Xavier Gutierrez, president and chief investment officer of the Meruelo Group, calls KWHY and KDAY "two diamonds that had lost their luster" and said the KDAY acquisition illustrates the company's goal to reflect the rich cultures of L.A.

Meruelo intends to keep KDAY's English-language, old-school hip-hop format and expand its coverage area. The station, the company believes, represents that blend of L.A. cultures and a way to increase revenue by pulling in advertising dollars earmarked for English-language media.

Meruelo is also planning to bolster the station's staff, which last month consisted of 16 people. KDAY studios and staff are to remain at their mid-Wilshire address.

Zeke Chaidez, the station's general manager, described Meruelo Media's plan to buy the station as "a life jacket being thrown into the water, something for us to hold on to."

"We were really running without much fuel," Chaidez said, "and now the question is: How fast and how far are we going to go?"

meg.james@latimes.com

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