Vivendi, owner of the world’s largest music company, Universal Music Group, told investors on Tuesday that it is considering selling an additional 10% stake in the company to an unnamed U.S. investor. Vivendi, which has already sold 20% of UMG to Chinese giant Tencent, is expected to sell off 60% of UMG in an IPO by the end of September.
It had been expected to retain its full 20%, but apparently is considering whether the market is hot enough to cash in now.
“The group is analyzing the opportunity of selling 10 percent of UMG shares to an American investor or initiating a public offering (IPO) of at least 5 percent and up to 10 percent of UMG shares,” Vivendi said Tuesday in an update to investors. The latter point means that the company could decide to float 65 or 70% in the IPO later this year.
“Furthermore, Vivendi will retain 10 percent of the UMG share capital for a minimum period of two years in order to remain associated with the development of its subsidiary” while also “benefiting from the protection of EU legislation applicable to parent companies and subsidiaries from different member states.” Vivendi also told investors that there will be no “poison pill” to protect against a hostile takeover after the IPO.
It also said UMG’s new publicly-listed Dutch entity will have a board “comprised primarily of non-executive members, a majority of whom will be independent,” and that neither Vivendi nor Group Bolloré — which is operated by Vivendi chief Vincent Bollore and has a 27% stake in Vivendi — “intend to be represented on the Board at this stage.”
The UMG board members’ term of office will be limited to two business years, said Vivendi, and “no poison pill mechanism will be put in place.”
UMG was valued at a whopping $53 billion — up from $36 billion last year — last month in Goldman Sachs’ annual “Music in the Air” study, is widely recognized in the music industry as an optimistic but authoritative survey of the business, demonstrating the perceived strength of the recorded-music and publishing businesses, which are primary among UMG’s many properties, despite the pandemic that has flattened other sectors of the industry, particularly live entertainment.
In Vivendi’s earnings report last month, UMG’s revenues were up 9.4% thanks to the growth in subscription and streaming revenues (which was up 19.6%). Recorded music revenues grew by 10.8%, while physical sales were up 14.8%, driven by bigger sales of new release and catalog titles.
New releases from King & Prince and Justin Bieber, as well as continued sales from The Weeknd, Ariana Grande and Pop Smoke were part of the recorded music best sellers for the first quarter of 2021. On the Spotify global chart, UMG had Olivia Rodrigo’s (pictured) “Driver’s license” and Justin Bieber’s “Peaches” rank No. 1 during 12 of 13 weeks in the first quarter. The cancellation of touring activities, however, did have an impact on merchandising and other revenues, which were down 10.0%.
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