Vivendi plans to spin off Universal Music Group, its largest company, and distribute 60 percent of the group’s share capital to its investors by the end of the year. to capitalize on the growing value of musical assets.
If shareholders approve it in a vote in late March, the sale will lead to the world’s largest music company, home to pop stars, including Lady Gaga and Kanye West, being an independent company in which Vivendi would own only a 20 percent stake.
It would also give more to a French media group controlled by billionaire Vincent Bolloré firepower for acquisitions in other areas such as publishing, television and communications.
Once Vivendi founds UMG, the remaining business will be much smaller and will mainly focus on France, with the payer of TV operator Canal Plus, Havas communications agency, game game publisher Gameloft and book publisher Editis. In 2019, UMG accounted for 45 percent of Vivendi’s sales of 15.9 billion euros and 73 percent of operating profit of 1.5 billion euros.
Vivendi announced the plan in a statement on Saturday, and said that the board for UMG set a “minimum goal of 30 billion euros”. Chinese group Tencent used the option in late January to buy an additional 10 percent of UMG according to that estimate, taking a total stake of 20 percent.
“The transaction was completed in the last few days on that basis. . . as well as the interests of other investors at potentially higher prices, have now allowed management to consider distributing 60 percent of UMG’s share capital to Vivendi shareholders, ”Vivendi said.
Vivendi shareholders would receive “exceptional distribution” in the form of new UMG shares, which would then be listed in Amsterdam, where the company would be established.
It looks like the announcement will end years of speculation about what Bolloré would do with Universal. The billionaire rejected SoftBank’s offer for UMG worth 6.5 billion euros in 2013. After considering listing UMG on public markets in 2017, Vivendi ruled it out in 2018 and said it would seek to sell up to half of the company, paving the way for a Tencent contract.
When a smaller rival Warner Music went public last June estimated at nearly $ 16 billion, it showed that investors in the public market have an appetite for music labels. Since then, Warner’s market capitalization has risen to $ 19.2 billion.
The value of music companies has soared into in recent years as streaming services like Spotify have revived the industry, collecting billions in royalties on music labels. The industry’s “big three” labels – market leader Universal, Sony Music and Warner Music – control nearly 80 percent of the market, which is projected to more than double to $ 45 billion by 2030, according to Goldman Sachs.
In a message to employees, CEO Yannick Bolloré and Vivendi CEO Arnaud de Puyfontaine said the plan would “mark a new phase” for both Vivendi and UMG.
“UMG could take advantage of significantly increased financial flexibility to continue its dynamic growth and its pioneering role in the music and entertainment industry, to the benefit of artists and fans everywhere,” they wrote.