Vivendi Hits the Right Note With Investors on UMG Stake Sale Talks
August 06 2019 - 4:14AM
Dow Jones News
By Anthony Shevlin
Shares in Vivendi SA (VIV.FR) surged Tuesday as investors
welcomed news that it entered preliminary negotiations with China's
Tencent Holdings Ltd. (0700.HK) for a 10% stake in its Universal
Music Group business.
At GMT 0735, shares in Vivendi traded 6.3% higher at
EUR25.50.
The deal would value the record label at 30 billion euros
($33.50 billion) and the Chinese internet giant would have a
one-year option to acquire an additional 10% stake in the music
business at the same terms.
Analysts at Citi said the initial stake is less than expected
and the implied EUR30 billion valuation of Universal is below the
top end of the range.
"While there is no doubt the implied equity value is above what
is currently implied by the market price--around EUR25 billion--it
is also below the top end of the range," Citi said, adding that
bulls were expecting a valuation between EUR30 billion and EUR40
billion.
Vivendi originally said in July last year that it was
considering selling up to 50% of Universal, but ruled out an
initial public offering. Back then, the company said the move would
probably be launched in the fall, and could be completed within the
next 18 months.
Vivendi said its planned sale of a stake in Universal would help
it raise cash for a buyback or acquisitions.
Citi analysts said the details of today's announced talks with
Tencent suggest just EUR3 billion of buyback potential compared
with expectations of over EUR10 billion.
"From [Vivendi's] perspective this is a great deal, even if the
proposed concurrent strategic partnership doesn't yield any
significant benefit," Citi said.
As for Tencent, Citi said having a stake in one of the three big
music labels will offer it strategic insights on how the industry
could develop from the perspective of an important upstream
business.
Write to Anthony Shevlin at anthony.shevlin@dowjones.com;
@anthony_shevlin
(END) Dow Jones Newswires
August 06, 2019 03:59 ET (07:59 GMT)
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