By Lina Saigol
Shares in Vivendi surged more than 16% on Monday after the French media group said that it may spin out Universal Music Group business in Amsterdam and distribute 60% of the capital to investors by year end, as it looks to cash in on the rising value of music assets.
The listing would give UMG, which is the world’s biggest music company and is home to singers including Lady Gaga, Taylor Swift , and Kanye West, /zigman2/quotes/202179234/delayed FR:VIV -0.61% the financial firepower to compete with rivals Warner Music Group /zigman2/quotes/218669580/composite WMG -0.08% and Sony Music Entertainment, amid a boom in music streaming services.
Vivendi /zigman2/quotes/202784359/delayed UK:0IIF -0.68% , which is controlled by billionaire Vincent Bollore, announced the plan on Saturday after it completed the sale of a 10% stake in UMG to a consortium led by Tencent Holdings /zigman2/quotes/204605823/delayed HK:700 +0.74% , which valued UMG at €30 billion ($36.4 billion). The Tencent-led group now owns 20% of the unit.
The transaction, “as well as interests expressed by other investors at potentially higher prices, have now enabled the Management Board to consider a distribution of 60% of UMG’s share capital to Vivendi /zigman2/quotes/204915844/composite VIVHY -0.14% shareholders,” the company said in a statement on Saturday.
It added that Vivendi’s leading institutional shareholders have been pressing for a number of years for a split or the distribution of UMG “to reduce Vivendi’s conglomerate discount.” Following the flotation, Vivendi would own 20% of UMG, which is led by chairman and Chief executive, Sir Lucian Grainge ,
Vivendi’s stock rose 16.86% in early European trading on Monday, while shares in Groupe Bollore, which owns a 27% stake in Vivendi, were up 13.30%.
A stock market listing would give UMG more financial power to strike deals and cash in on the boom in the surging popularity of streaming services like Spotify and Apple Music /zigman2/quotes/202934861/composite AAPL +1.92% , as well as social apps like TikTok and Instagram, which license songs to be used in posts by their users.
Analysts at UBS said that UMG – the world’s biggest music label and publisher – with almost double the revenues of rival Warner Media Group, has consistently delivered share gains in the last 3 years. “Post-split we see significant opportunities to unlock value via asset sales, M&A and capital management,” they added.
Warner Music Group /zigman2/quotes/218669580/composite WMG -0.08% made its own stock market debut on Nasdaq in June last year, raising $1.9 billion , to give the company a market valuation of almost $16 billion.
A string of high-profile artists striking lucrative deals to sell their music rights in recent weeks as songwriter catalogs fetch sale prices 10 to 18 times annual royalties, compared with 8 to 13 times in previous years.
London-listed Hipgnosis Song Fund /zigman2/quotes/204952632/delayed UK:SONG +0.36% has been one of the most acquisitive players, announcing deals for rights to music by veteran rock star Neil Young, Fleetwood Mac guitarist Lindsey Buckingham, and record producer Jimmy Iovine this year.
Vivendi said shareholders will be asked to approve the plan to spin out UMG at a meeting on March 29. The company also said it will propose a dividend of €0.60 per share for 2020 at a shareholder meeting scheduled for June.