Will Plan to Spin Off Universal Music Keep the Momentum High for Vivendi?

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 Will Plan to Spin Off Universal Music Keep the Momentum High for Vivendi?

Summary

  • Vivendi SA shares rallied after disclosing the plans of an IPO for UMG by the end of 2021.
  • The Universal Music Group is expected to go public on the Euronext stock exchange in Amsterdam by the end of the year.

Shares of French media conglomerate Vivendi SA (PAR: VIV) rallied nearly 20 per cent on Monday to EUR 31.22 as the company announced its plans to list its profitable division Universal Music Group (UMG) by the end of this year.

Last week, the Paris-based company said that it could distribute 60 per cent of UMG’s share capital to its shareholders.  A lot of institutional investors have been pushing for a split or the distribution of UMG. Notably, the media company had plans to list UMG a year ago.

On the back of UMG’s announcement to go public on the Euronext stock exchange in Amsterdam, Vivendi recorded the biggest one-day jump in its stock price since its listing in 1989.

To know more, also read: Tencent Music Entertainment acquires equity interest in Universal Music

A consortium led by Tencent Holdings Ltd, which owns 20 per cent of share capital in UMG, has valued the world’s biggest music label at £30 billion. The Tencent-led consortium favoured the listing of UMG in Amsterdam. However, the proposal to list UMG will be subjected to shareholders approval.

Since 2018, the Paris-based media conglomerate has been devising methods to cash in by selling music rights of the world’s biggest music brand, UMG. By the end of 2019, Vivendi strategically sold 10 per cent of stake in UMG to the Chinese web giant Tencent Holdings. Notably, Tencent bought another 10 per cent stake in UMG last week.

                              

                                                                                

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UMG’s future and Vivendi

Vivendi is a French media conglomerate, and UMG is one of its divisions. UMG’s success has impacted the growth of Vivendi’s other divisions as they have witnessed a significant drop in revenue. However, the music industry has come a long way. From cassettes, CD’s, music players to digital streaming, it has seen the transition.

The surging popularity of music streaming fueled the growth of the music industry. As a result, UMG scaled new heights. Under the proposed plan, UMG individual presence in the stock market will help the company raise funds easily as UMG enjoys richer brand equity.

Interestingly, Warner Music Group reached a valuation of $19 billion as it returned to the public market after a decade. Moreover, a public listing shall help UMG in taking on the competition with industry rivals such as Sony Music and Warner Music Group.

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