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Universal’s Amsterdam adventure is still laden with lean Vivendi shareholders

MBW’s Stat Of The Week is a series in which we show why a single data point deserves the attention of the global music industry. Stat Of the Week is supported by Cinq Music Group, a technology-driven record label, distribution, and rights management company.

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Yesterday MBW spread the news that Vivendi officially plans to bring the Universal Music Group to the public in the Netherlands later this year. Since our story landed, we’ve heard the same question over and over again: Why Amsterdam?

Of course, we’d like to tell you that Sir Lucian Grainge and the Bollorés picked the dam because they love to chase away sunny afternoons at The Grasshopper, but unfortunately that’s unlikely.

A more workable, albeit random, factor might be Vivendi’s own suggestion that Holland “is a country that was one of UMG’s historic homes”. (This is a reference to PolyGram, which was sold to Seagram for $ 10.6 billion in 1998 and then converted to UMG. Vivendi subsequently acquired Seagram in an all-stock transaction for $ 34 billion in 2000.)

One reason Vivendi went to the Netherlands was pinned down by the Financial Times last week: Amsterdam’s Euronext recently overtook the London Stock Exchange as Europe’s largest stock trading hub, in part due to the Dutch scoop[ing] the business lost by Britain since Brexit ”.

The FT said that this trend was driven by a ban on trading by EU-based financial institutions in London “because Brussels has not recognized that UK stock exchanges and trading venues have the same regulatory status as its own”.

Anywhere in the world that Universal Music Group goes public, perhaps the most striking first story to emerge from its IPO is how it left a mark on Vivendi’s shareholders.

Vivendi said management is currently considering a proposal to spin off 60% of Universal’s equity. This decision will be made by March 31st. The recently crowned 20% shareholder of UMG, a Tencent-led consortium, has given an “initial positive response” to this plan.

As part of the proposal, this 60% stake in Universal will be distributed to existing Vivendi shareholders, presumably giving these shareholders the opportunity to sell their new UMG equity on Amsterdam’s Euronext once trading begins.

Exane BNP Paribas estimates that with this share distribution, UMG’s stake after the IPO (but before trading) will be divided in this way: 20% in Vivendi, 20% in the Tencent consortium, 16% in the Bolloré group (Vivendis largest shareholder) and 44% to other Vivendi shareholders.

MBW’s statistics of the week: Following Vivendi’s IPO proposal, a Owners of 0.1% shares in Vivendi will shortly receive separate shares worth over $ 20 million in Universal Music Group today.

Vivendi logo

Vivendi says its current shareholders will receive their share of the 60% outsourced UMG equity through a “special dividend”. And when you do the math, the focus is really on the “special”.

If Vivendi approves the proposal, the owner of a 1% stake in Vivendi appears to receive an additional 0.6% stake (via this “special dividend”) in the newly spun off Universal.

Vivendi says it is ready for Universal’s IPO as UMG’s company valuation of € 30 billion (currently around $ 36 billion) has been cemented. This was achieved through the Tencent consortium, which acquired a second 10% stake in UMG for EUR 3 billion in January.

What if Universal is now swimming in Amsterdam with this advertised valuation of 30 billion euros?

  • The owner of one 1% Participation in Vivendi today would get one 0.6% Participation in Universal … worth EUR 180 million (currently around $ 218 million).
  • The owner of one 0.1% Participation in Vivendi today would get one 0.06% Participation in Universal … worth € 18 million ($ 22 millionn)
  • And the owner of one 0.01% Participation in Vivendi today would get one 0.006% Participation in Universal … worth € 1.8 million ($ 2.2 million)

Yes, if everything goes well with the UMG IPO plan, even Vivendi shareholders with a fraction of the shares in the French multimedia company will become multimillionaires.

Such numbers could grab the attention of artist attorneys and wonder where their flock’s share of the money rests. Ultimately, however, Vivendi’s investors are not responding to the music business, but to the difficulties of the stock market and the hard-hearted rules of company ownership.

(As such, these artist reps may want to focus instead on encouraging Vivendi / Universal to sell UMG’s stake in Spotify, which – if it happened today – likely a payment of more than $ 500 million to the UMG artist community would trigger.)

Vivendi shareholders do not only get rich through their UMG share sales; They will also be left with their current stakes in Vivendi.

Without the majority stake in UMG, one would expect Vivendi to be obviously worth less than it is today.

Math is fun here. Vivendi, which is traded on Parisian Euronext, currently has a market capitalization of 30.9 billion euros.

That’s little more than Universal Music Group’s Tencent-driven valuation (€ 30 billion).

Nevertheless, UMG, although Vivendi’s largest company, contributed almost half (45.8%) to the turnover of the French company in the first nine months of 2020.

The remainder of Vivendi’s sales of 11.6 billion euros during this period was generated by a mix of subsidiaries such as Canal Plus (TV), StudioCanal (film), Havas (advertising), SeeTickets (ticketing) and Gameloft (video games) .

Vivendi also owns Editis, which it acquired in 2019 for $ 1 billion.

So Vivendi will continue to be a valuable multimedia powerhouse after its crown jewel – Universal Music Group – was released in Amsterdam.

But even if UMG’s majority stake takes a plane to Schiphol, Vivendi’s investors will say goodbye to a glittering golden goodbye.

The Cinq Music Group’s repertoire has garnered Grammy awards, dozen of gold and platinum RIAA certifications, and numerous # 1 chart positions on a variety of Billboard charts. The repertoire includes heavyweights like Bad Bunny, Janet Jackson, Daddy Yankee, TI, Sean Kingston, Anuel, and hundreds more.Music business worldwide

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