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Vivendi’s plan to sell half of Universal Music on track, but no hurry to do a deal

By | Published on Thursday 20 June 2019

Vivendi

The Chairman of Universal Music owner Vivendi has confirmed that the company’s plan to sell up to 50% of its music business to a strategic partner is still very much underway. Although he stressed that he and his board are in no hurry to rush into any deal. The process of negotiating with possible partners will start this year, but any actual transaction would come later.

Vivendi confirmed last July that, as had long been speculated, it would seek to sell up to 50% of its shares in the Universal Music Group. Ever since that confirmation, and indeed before as everyone was busy speculating, various potential buyers have been mooted, along with valuations of the Universal music business that range from the impressive to the optimistic to the ludicrous.

Among the possible buyers are China’s Tencent, US investment firm KKR and American media group Liberty, which is already a significant shareholder in Sirius, Pandora and Live Nation. It’s thought that Vivendi would prefer a partner that would pump in money to fuel acquisitions and growth but not want to be so hands-on in setting UMG’s strategic direction, which might ultimately rule some possible bidders out.

The latest update on Vivendi’s UMG plans comes from Yannick Bollore, who took over from his father Vincent as Chairman of the French media conglomerate last year. He was mainly talking to Bloomberg in his other guise as Chairman of Vivendi’s marketing business Havas – him being at the Cannes Lions ad industry shindig – but Universal Music also came up.

Bollore corrected Bloomberg’s interviewer who said that Vivendi was seeking to “spin off” its music division. That’s not true, he said, instead his company was hoping “to find a strategic or financial partner [to take] up to 50% to accelerate the growth of UMG”.

“As you know, the music industry is going through a huge period of growth”, he added. “The business is thriving, and we want to make sure that we can accelerate this growth in the coming years. For now, we have communicated that we want to open a process before the end of 2019, and all the management of Vivendi is confident that will happen”.

However, he confirmed, while the process of bringing in a new partner, investor and shareholder would begin this year, that doesn’t mean any speedy deals will be done. “You know, we’re not in a hurry”, he went on. “Vivendi is doing very well. UMG is doing very well. The question is how to find the right partner … once again, everything’s fine – trust me”.

In some ways Vivendi will likely benefit from playing it slow, given streaming income continues to grow each month, key emerging markets are really starting to boom, the bankers keep putting out wildly optimistic forecasts about the future of music rights, and Universal is still steadily expanding its interests in recordings, songs and merchandise.

Though, of course, pessimists might point out that the streaming boom is still built on mainly loss-making services that may seek to radically alter their business models and/or push other kinds of content to the fore in the years ahead.

And there is litigation looming in courts on both sides of the Atlantic that could see the majors having to hand back big chucks of super-lucrative American catalogue to the artists, and possibly non-American catalogue (songs and recordings) too.

Meanwhile another ongoing legal case could force Vivendi to radically alter the way it reports to creators through both its music and movie divisions, with any new levels of transparency potentially resulting in higher payments to legacy creators.

Oh, and as every year goes by, signing up big name and buzzy new music talent generally requires giving more and getting less in return.

So, hold off long enough so you offload that 50% of stock as investment types are at peak frenzy in their excitement about the renewed value of music rights, but not so long that the streaming market collapses or your core business model starts to fall apart. Good plan.



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