Vivendi to Sell Up to 50 Percent of Universal Music Group

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Vincent Bollore

The media conglomerate nixed an expected IPO and instead will offload half of the company that's home to Taylor Swift and Katy Perry.

Vincent Bollore’s Vivendi will sell up to half of Universal Music Group and has ruled out an IPO, the company announced after market close on Monday.

The conglomerate said it is looking to sell up to 50 percent of UMG "to one or more strategic partners" and will begin that search soon. It is looking to seal the deal quickly, seeking out a buyer this fall and completing the transaction within the next 18 months.

The move comes as a surprise to many analysts, who had long predicted the company would in fact offer an IPO. CEO Arnaud de Puyfontaine said Vivendi was laying groundwork for such a move as recently as April. It has now quashed the IPO option “due to its complexity.”

The sale is also surprising as UMG, which counts Taylor Swift, Katy Perry, Lady Gaga and The Rolling Stones among its roster, accounts for roughly 45 percent of Vivendi’s revenues and more than 70 percent of its operating income.

Previous valuations of UMG have place its value at upwards of $40 billion, putting the more traditional music company above streamers such as Spotify.

First half of 2018 results also released Monday show its strength, with UMG up 6.8 percent for €2.63 billion ($3 billion) in turnover. UMG’s total revenues in 2017, including recorded music and publishing, rose 10 percent to $6.4 billion.

It’s the first significant move by new chair Yannick Bollore since he took over as chair of the company from his father in April. The elder Bollore is currently under investigation for bribing officials in Africa.

The cash available after the sale of such a large asset would allow for some big entertainment acquisitions, as Vivendi looks to build an "advertainment" model that integrates everything from ticket sales and physical venues for concerts to video games for its films to the talent that stars in them under its Vivendi Talents agency banner.

Vivendi is also in the middle of offloading its 11 percent stake in electronics retailer Fnac Darty for $312.4 million, another big chunk of change to add to its deep pockets for any future big company buys.

Overall, Vivendi’s revenues for the first half of 2018 grew 4 percent to $7.5 billion, with income jumping 50 percent to $704 million. Those numbers were boosted by the integration of advertising behemoth Havas, a Bollore family company which was bought last year by Vivendi for $2.9 billion.

Paddington 2 boosted the studio side, with StudioCanal’s revenues up 17.9 percent.

CanalPlus Group’s revenues contributed $3 million, up roughly one percent, which the company attributed to subscriber growth for its pay-TV channels in mainland France. The churn rate was lower, for a total growth up 271,000 subscribers to 16 million despite losing rights to the World Cup to BeIN Sports.

The company also cited YouTube competitor DailyMotion’s new rollout and strategy as a success, with revenues up 36.6 percent to $37.4 million, and Vivendi Entertainment’s successful reality formats including Couple or Not and Guess My Age.

The group also hailed a $1.4 billion capital gain on the sale of its interest in video game maker Ubisoft after it was thwarted from a hostile takeover there.

Vivendi also took a write-down on its $599 million investment in Telecom Italia, which has been mired in legal and shareholder battles. The group also laid out its plans to acquire French publishing group Editis, which is valued at $1 billion.