Official: Vivendi to explore benefits of Universal Music IPO

French company Vivendi has taken a major step in an IPO for Universal Music Group. 

At a supervisory board meeting on May 17, it green-lit moves for the management board to explore the benefits of making the music company public.

Vivendi CEO Arnaud de Puyfontaine announced in Paris that after approval to investigate the options at a May 17 board meeting, “We have started work that will allow us to present the benefits of a potential listing of UMG to the supervisory board.”

Vivendi’s shares went up 15% after the announcement.

An IPO, part-IPO or a partial sale to a third party of the world’s biggest record company are a range of possibilities.

de Puyfontaine believes that if Vivendi does go the IPO route, Universal Music’s valuation would be higher than Spotify‘s.

“The valuation of Spotify is interesting,” he said, “and we believe the valuation of UMG is above that.”

In August 2017, Goldman Sachs raised its valuation of UMG to US $23.5 billion (from around $20.1 billion), a 16% jump, and Sony Music to around $20.1 billion, based on its prediction that worldwide revenues from streaming will reach a $28 billion by 2030.

In January 2018,  JPMorgan Cazenove issued a report that asserted if Spotify was worth $20 billion, then UMG was worth more than $40 billion.

Spotify, which began trading publicly on April 3, has since seen its market capitalisation climb to $27.3 billion.

Universal was valued at $6 billion in 2010.

Universal Music Group makes up 47% of Vivendi revenue, the highest of its many divisions, which includes the film and TV Canal+Group, ad company Havas and video game publisher Gameloft.

The music company last year posted record revenues of over $6 billion, a new record.

EBITA profits leapt up 20.6% at constant currency to €761m ($860m).

The financial growth was due to streaming which doubled in the two years from 2015 to 2017 (€954m to €1.97bn) and now constitutes 57% of its income stream.

This year, between the start of January and the end of March, Universal Music’s revenue was €1.222 billion – a 4.5% interest from the first three months of 2017.

Also at the board meeting, de Puyfontaine revealed, it was decided that Universal Music would for the time being retain its 5% share of Spotify.

Warner, Sony and Merlin have cashed some, or all, of their holdings.