Vivendi Teases Universal Music IPO
February 13 2020 - 4:24PM
Dow Jones News
By Anne Steele
Vivendi SA teased an initial public offering of its Universal
Music Group subsidiary, seeking to cash in on a resurgent music
business.
The one-line disclosure was included in Vivendi's quarterly
earnings report Thursday, more than 18 months after the French
media conglomerate said it would seek buyers for up to 50% of
Universal.
Tencent Holdings Ltd. at the end of December struck a EUR3
billion ($3.25 billion) deal for a 10% stake in Universal, valuing
the world's largest music company at $33.4 billion. The deal gives
Tencent the option to buy another 10% by next January. Vivendi said
at the time it announced the Tencent deal that it was in talks with
other investors about selling an additional minority stake at a
valuation that "would at least be identical."
Vivendi said Thursday those negotiations are ongoing and that an
IPO is planned for early 2023 at the latest. An IPO would allow
current and potential investors to cash out as the value of music
assets has skyrocketed.
The music industry, decimated starting in 2001 by online piracy
and the collapse of CD sales, has been on a tear for four years,
with revenue from subscriptions to streaming services like those
offered by Spotify Technology SA and Apple Inc. turning around the
fortunes of record companies. Global recorded music revenue grew
10% to $19.1 billion in 2018, according to the International
Federation of the Phonographic Industry, with streaming revenue
accounting for almost half of overall revenue.
In the U.S., the world's largest music market, the growth has
been even more pronounced. Revenue from recorded music in the U.S.
rose 18% to $5.4 billion in the first half of 2019, according to
the Recording Industry Association of America, with streaming
representing 80% of the industry's total revenue.
Universal's top line rose 14% to EUR7.16 billion in 2019, thanks
to a 22% lift in streaming revenue to EUR3.33 billion, according to
Vivendi's statement on Thursday. Overall recorded music revenue
climbed 12% year-over-year, with even physical sales -- on the
decline industry wide for over a decade -- up 3%.
Vivendi's announcement Thursday is the latest in a series of
flirtations with possible transactions involving its music arm.
In 2017 Vivendi Chief Executive Arnaud de Puyfontaine told The
Wall Street Journal Vivendi could float a minority stake in
Universal -- at the time a departure from its longstanding
opposition to selling any part of the company. Those plans were
abandoned in 2018, with executives saying it was "too complex."
Vivendi had rebuffed earlier offers for Universal, when the
music company was worth significantly less than it is today. Five
years ago, Vivendi brushed off an activist investor's call to sell
some or all of Universal and use the funds to boost cash returns.
In 2013, it rejected an $8.5 billion offer for Universal from
Japan's SoftBank Corp.
Last week, Access Industries Inc.'s Warner Music Group Corp.,
the third-largest music company behind Universal and Sony Corp.'s
Sony Music Entertainment, filed documents to go public.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
February 13, 2020 16:09 ET (21:09 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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