Which US company might soon buy 10% of Universal Music Group… in a multi-billion dollar deal?

Universal Music Group owns labels including Interscope, Republic, Def Jam, and Capitol Records. The latter is part of Capitol Music Group, based at the famous Capitol Tower in Hollywood (credit: Brenda Rocha-Blossom / Shutterstock)

By the end of September, so long as all goes as expected, we know that 60% of Universal Music Group will be publicly traded on the Amsterdam stock exchange.

Following this flotation, it’s long been assumed, two parties would each retain a 20% ownership stake in UMG: (i) the music firm’s current parent, Vivendi, plus (ii) a consortium led by Tencent.

This no longer looks to be the plan.

In an update to investors today (May 18), Vivendi has indicated it may only keep a 10% ownership share, rather than 20%, of UMG post-flotation – with an additional 10% of its holding being sold off ahead of the Big Amsterdam Listing.

Vivendi said today that it is currently “analyzing the opportunity” of selling off this additional 10% in UMG (dramatic chord if you would, maestro…) to “an American investor”.

This teasing rough-sketch clearly suggests Vivendi is already in discussions with such a party, and it’s bound to get industry tongues wagging.

Could US-based Liberty Media, which previously glanced in UMG’s direction with acquisitive eyes, be a potential suitor? Or might another Stateside media conglomerate swoop?

Either way, it’s not small news: with UMG recently valued at USD $53 billion by Goldman Sachs, this additional 10% stake could be worth more than $5 billion.

If the whole “US investor” thing doesn’t work out, Vivendi said today it might instead consider an alternative: offloading the additional 10% stake in Universal by “initiating a public offering of at least 5% and up to 10% of UMG shares”.

In other words, Vivendi could end up floating 70%, rather than 60%, of UMG on the stock market.

“[Vivendi] is analyzing the opportunity of selling 10% of UMG shares to an American investor or initiating a public offering of at least 5% and up to 10% of UMG shares.”

Vivendi statement issued today (May 18)

One thing’s for sure: Whether Vivendi ends up selling off a 60%, 65%, or 70% stake in UMG, it has to keep at least a 10% shareholding.

Its investor note confirmed today: “Vivendi will retain 10% of the UMG share capital for a minimum period of two years in order to remain associated with the development of its subsidiary while benefiting from the protection of EU legislation applicable to parent companies and subsidiaries from different Member States.”

Vivendi also confirmed other details of its UMG public-listing plan in its note today.

It said that Universal Music Group’s new publicly-listed Dutch entity (NV) will have a board comprised primarily of non-executive members, a majority of whom will be independent.

It added that neither Vivendi, nor the Bolloré Group – a 27% stakeholder in Vivendi – will be represented on the UMG NV 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”.

New filings by Vivendi have revealed that UMG posted a quarterly EBIT of €322 million in Q1 2021, compared to €248 million in the first quarter of 2020.

Vivendi attributed this profitability increase to “a 9.4% revenue growth and strict cost control during the period”.Music Business Worldwide