Universal Music Group confirms IPO for 2022, Tencent deal finalised

Universal Music Group (UMG) will go public in 2022, parent company Vivendi has confirmed.

Vivendi made the announcement as part of its third-quarter earnings report on the three months to the end of September, released overnight.

Vivendi CFO Hervé Philippe said that talks had already been held with UMG partners.

He was positive about its outcome because the market was strong for music companies, and because of UMG’s continued healthy performance.

In the same call, Vivendi CEO Arnaud de Puyfontaine confirmed that the company is “pursuing the process of selling additional minority [stakes] in UMG to other partners”.

Vivendi also revealed that the 10% sale of UMG to a consortium led by Tencent has been finalised, with the option of buying an extra 10% by January 15, 2021.

The deal also allows Tencent Music to acquire a minority stake in UM Greater China.

The Tencent consortium’s €3 billion (AU$5 billion) investment for 10% of the company is based on a UMG valuation of €30 billion ($50.3 billion).

“Following the success of this significant strategic transaction, Vivendi is pursuing its plan to sell additional minority interests in UMG with the assistance of several mandated banks,” Vivendi said.

“An IPO is planned for 2022. The cash generated by these transactions may be used by Vivendi to reduce its financial debt and to finance a significant share buyback program and acquisitions.”

The market is certainly aware of the music industry’s consecutive growth in the last five years, and Warner Music Group’s IPO in May allowed owner Access Industries to make AU$24.1 billion.

UMG is in a healthy state, despite the pandemic, according to its overnight financial postings. Overall revenues were up 5.1% for the first nine months of 2020 and up 3% in the third quarter.

In Q3, recorded music revenues grew by 11% YoY, helped by a 22.6% jump in streaming revenues.

But physical sales were down 10.2% compared to the first nine months of 2019, while download sales also declined by 20.1%.

Bestsellers for the first nine months of 2020 included new releases from The Weeknd, King & Prince, BTS, Justin Bieber and Lil Baby, and continued sales from Billie Eilish and Post Malone.

Music publishing revenues grew by 15.6% compared to the first nine months of 2019.

Vivendi attributed this to the growth in subscription and streaming revenues, as well as the receipt of a digital royalty claim in the second quarter of 2020.

But the effects of the pandemic were shown in a 42.6% drop in monies from touring and retail, merchandising and other sources.