HITS Daily Double


Vivendi said it has ruled out an IPO but will sell up to half of UMG to a “strategic partner…in order to extract the highest value,” as valuations of music assets continue to skyrocket.

This revelation, which came in the form of a statement issued by Vivendi on 6/30, was the blockbuster news coming out of the French media company’s midyear report.

The Vivendi Management Board made the recommendation and presented it to the company’s Supervisory Board.

During the earnings call, CEO Arnaud de Puyfontaine said, “We will only choose investors who are compatible with Universal Music Group’s current strategy [and which] “will continue accelerating its growth.”

According to Vivendi, the transaction “will likely be launched this fall and could be completed within the next 18 months.”

Vivendi will establish a floor price for the entry of partners into UMG’s share capital.

A base price will be determined for bidders; recent valuations of UMG have been as high as $40 billion.

The news triggered a 3.5% jump in Vivendi shares.

It's important to note that, while de Puyfontaine is Vivendi’s ranking executive, the ultimate power rests with billionaire Vincent Bolloré (pictured), whose conglomerate Bolloré Group controls the company.

Vivendi said Universal’s streaming business performed well in the first half of 2018—as a look at myriad stories on this site will readily confirm. UMG is the parent company’s biggest profit generator, representing around 45% of revenue and 70% of operating income last year.

For the first half of 2018, UMG’s revenues were up 6.8% to $3.08b at constant currency and perimeter compared to the first half of 2017. Recorded music revenues grew by 7.4% at constant currency and perimeter thanks to subscription and streaming revenue growth (up 34.3%). Downloads were down 26.5% and physical sales were off 19.1%.Music publishing revenues grew by 11.1% at constant currency and perimeter.

Could Spotify and/or Tencent possibly attempt to get in on the UMG action? Owning a chunk of the dominant music group would be a transformative move for either company. Let the speculation begin.