September 20, 2021
By Matthieu Protard and Gwénaëlle Barzic
PARIS / AMSTERDAM (Reuters) – Universal Music Group, the business behind singers like Lady Gaga, Taylor Swift and The Weeknd, is valued at around € 33.5 billion ($ 39.30 billion) ahead of the stock market debut of the record label in Amsterdam on Tuesday.
France’s Vivendi is spinning off Universal and on Monday set a reference price for the listing at € 18.5 per share, according to a press release released by Euronext.
Universal Music Group’s (UMG) listing will be Europe’s largest this year and will deliver 60% of the shares to Vivendi shareholders.
Universal is betting that a Spotify-led streaming boom that has fueled royalty revenue and profit growth for several years still has a long way to go, in a music industry that dominates alongside Warner and Sony Music, part of Sony. Group Corp.
Its listing carries a high stakes for the owner of Canal + Vivendi, who hopes to get rid of a conglomerate discount. However, the listing raises questions about Vivendi’s strategy once she separates from her cash cow, of which she will only retain a 10% stake.
Several high-profile investors have also already acquired large stakes in Universal, relying in part on the group’s catalog, which includes the likes of Bob Dylan and the Beatles. They also hope that deals with ad-supported software and social media platforms like YouTube and TikTok from Alphabet Inc will support its performance and evaluation.
US billionaire William Ackman suffered a setback when his attempt to invest in Universal through a special purpose acquisition vehicle (SPAC) ran into a hitch with regulators and investors. However, Ackman still got a 10% stake through his hedge fund Pershing Square. China’s Tencent owns 20% of Universal.
One winner on the list will be Vincent Bollore, the French media tycoon who is the controlling shareholder of Vivendi. It will receive Universal shares worth € 6 billion at Monday’s price.
Bollore has been an aggressive consolidator in the French media and publishing landscape and has a long-standing ambition to build a southern European media powerhouse.
Vivendi itself may suffer in the short term, however, and shares are expected to drop on Tuesday when they begin trading without Universal.
BNP Paribas, Natixis, Credit Agricole, Morgan Stanley and Societe Generale are the main financial advisors to the transaction, out of 17 banks in total, an unusually high total.
The commission should be lower than the standard quotes as no fresh money is raised as part of the spin-off.
Universal stated in its prospectus that the total expenses payable in connection with the Universal agreement will not exceed 0.5% of the total amount of the distribution of the shares.
The listing is the latest victory for Euronext in Amsterdam, which has grown as a financial center in the wake of Britain’s exit from the European Union. Prior to Universal, Amsterdam had attracted a record 14 IPOs so far this year, of which 10 were SPACs.
But the only Amsterdam listing comparable in size to Universal in recent history was the € 95 billion listing of tech investor Prosus, also a spin-off, in September 2019.
(1 $ = 0.8524 euros)
(Additional Report by Toby Sterling; Written by Sarah White; Editing by David Evans and Lisa Shumaker)
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