Vivendi to sell 50% stake in Universal Music, IPO proposal dropped

French media conglomerate Vivendi has ruled out an IPO for Universal Music Group (UMG), despite the fact it knows that the streaming boom would make it a more successful one than Spotify’s.

But the complexities of UMGs global structure made it too difficult to follow through.

Instead, Vivendi has decided on another option it considered at the same time– a sale of 50% of the successful music company, which was last valued at US$40 billion.

Vivendi wants to move quickly with UMG in such a red-hot position, after record sales in 2017, and strong growth this year.

It will now work with its banks to consider one or two strategic partners, with the sale expected to begin in the next few months and to be finalised in 18 months.

Vivendi CEO Arnaud de Puyfontaine said: “We will only choose investors who are compatible with Universal Music Group’s current strategy” and would help its continued growth.

He was speaking at an earnings call after the release of Vivendi’s mid-year report.

According to de Puyfontaine, UMG posted “dynamic growth” in the first six months of 2018, driven by streaming revenue.

The music company generated total revenues of €2.63 billion (A$4.15 billion), up 6.8% from the first half of 2017 at constant currency or down 1.4% on an actual basis.

Recorded music revenues were up 7.4% at constant currency to €2.12 billion ($3.35 billion).

Streaming and subscription revenue marked a 34.3% jump to €1.187 billion.

These now account for 56% of recorded music revenues compared to 17% in 2014.

They offset the 25.5% drop in download sales and a further 19.1% decline in physical formats.

Bestsellers of this year so far were albums from Drake, Post Malone, Migos, and the Black Panther soundtrack.

UMG labels include the Capitol Music Group, Republic Records, Island Records, Def Jam, Interscope Geffen A&M Records, UMG Nashville and Universal Music Latin, among others.

Music publishing revenues grew by 11.1% at constant currency, also driven by subscription and streaming revenues, as well as better performance revenues.

Vivendi also noted that its stake in Spotify in the first six months of 2018 is now worth €456 million ($720.6 million) although it has previously stated it has no plans to divest these unlike Warner Music and Sony Music Entertainment.