The largest music company in the world is finally going solo, although it is not in the usual venue.
Vivendi, French owner of Universal Music Group, said on Saturday that it would eliminate its music industry and list in the Netherlands later this year. It has the idea to announce in 2022 the record company working with Lady Gaga and Taylor Swift. The strong investor’s appetite for music assets since the start of the pandemic may explain the accelerated timeline. The news raised Vivendi’s share price by a fifth on Monday.
Once the spin-off is complete, the French company run by billionaire Vincent Bolloré will still own a fifth of Universal. Chinese technology giant Tencent will own 20% after recently exercising an option to increase its stake in the music giant at a valuation of € 30 billion – equivalent to $ 36 billion. The remaining 60% will be handed over to Vivendi investors in a special distribution.
Shareholders have been pushing for the step for years as a way to unlock value in the music industry. According to Barclays analysts, Vivendi’s shares have been trading at an average discount of around 10% on the sum-of-the-under-valuation since the end of 2017. Soon, investors will be able to get direct exposure to Universal rather than having to buy shares in the sprawling French conglomerate.
Although the organizers of live concerts suffered during the pandemic, streaming services benefited because consumers spent more time listening to music. Spotify expanded its monthly active users in the fourth quarter of 2020 to 345 million, a 27% increase over the same period a year earlier. Major record companies such as Universal and Warner are consequently catching up more royalties from digital music platforms. In the third quarter, Universal’s streaming revenue rose 23%, the fastest growth since early 2019.