Universal Music Group is raising $3.5 billion in financing. Will a spending spree follow?

Photo: MBW

MBW’s Stat Of The Week is a series in which we highlight a data point that deserves the attention of the global music industry. Stat Of the Week is supported by Cinq Music Group, a technology-driven record label, distribution, and rights management company.

Last month, MBW revealed that Universal Music Group spent a whopping €1.5 billion (approx $1.7bn) in 2020 on a combination of acquiring catalogs and paying advances to artists.

This expenditure figure was unusually large – more than three times the equivalent number from the prior year. It included nearly $400m spent by UMG on acquiring the peerless song catalog of Bob Dylan in Q4 2020.

This all seemed indicative of something important: the ‘traditional’ major music companies, like Universal, are doggedly refusing to bow out of a modern music rights acquisition frenzy that has been accelerated by the likes of Hipgnosis Songs Fund, Primary Wave, KKR and others. (Another example of this trend: Sony Music Publishing has just spend an unknown – but almost certainly nine-figure – sum on buying Paul Simon’s song catalog.)

The $1.7bn sum Universal spent in 2020 suggested that company was locking down its market power (and refusing to allow it to be snapped up elsewhere) ahead of UMG’s debut on the public markets, which is expected to arrive in Amsterdam later this year.

So, did Universal exhaust its music acquisition war-chest with its mammoth 2020 catalog splurge?

Don’t bet on it.

Universal Music Group has confirmed to MBW that it recently reached an agreement with four “leading banks” regarding a new five-year financing line worth €3 billion (approximately $3.5 billion).

UMG expects the syndication of this financing amongst a pool of banks to be completed by the end of April 2021.

One particularly interesting aspect of this raise is that it is being carried out by Universal itself, rather than its majority-parent, Vivendi.

Specifically, it is Universal’s Dutch company – Universal Music Group B.V. – that is raising the $3.5 billion.

That’s not only significant because Universal’s listing on the stock market will take place in Amsterdam this year. It’s also significant because of the corporate structure of UMG today – a structure that appears to have been regrouped and cemented in readiness for the firm going public.

MBW has obtained UMG’s latest official corporate org chart (see below).

It shows Universal Music B.V. as the corporate parent of the firm’s two global subsidiaries: (i) Universal Music Group Inc (covering the US); and (ii) Universal International Music B.V. (covering UMG’s ex-US operations in territories such as the UK, Japan, Germany, China, South Korea, Canada, and France).

Indeed, we’ve confirmed that Universal Music Group’s corporate headquarters today are officially located in Hilversum, Netherlands, while its operational headquarters are located in Santa Monica, California, USA.

In other words, Universal Music B.V. is the corporate name of the world’s largest music rights company. The one currently owned 80% by Vivendi, and 20% by a consortium led by Tencent.

Pretty soon, therefore, we expect a 60% chunk of Universal Music B.V. to be spun out onto the Amsterdam stock exchange.

As long as UMG’s new financing play is successful, this company will go public with $3.5 billion of capital in its back pocket.

Some of that, we expect, will be used as operating capital to get the newly-floated company motoring.

But it doesn’t take a music biz soothsayer to suggest a chunk of it will subsequently work its way into the wallets of iconic songwriters/artists as they sell their life’s work into a frothy market… for the highest possible price.

Cinq Music Group’s repertoire has won Grammy awards, dozens of Gold and Platinum RIAA certifications, and numerous No.1 chart positions on a variety of Billboard charts. Its repertoire includes heavyweights such as Bad Bunny, Janet Jackson, Daddy Yankee, T.I., Sean Kingston, Anuel, and hundreds more.Music Business Worldwide

Related Posts