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The biggest music company in the world is finally going solo, but not in the usual hall.
On Saturday, the French owner of Universal Music Group, Vivendi, announced that it would abandon its music business and list it in the Netherlands later this year. He had already discussed the idea of taking the label that works with Lady Gaga and Taylor Swift public in 2022. The strong appetite of investors for musical assets since the start of the pandemic could explain the acceleration of the schedule. The news sent Vivendi’s share price up a fifth on Monday.
Once the spin-off is over, the French company headed by billionaire Vincent Bolloré will still own a fifth of Universal. Chinese tech giant Tencent will hold 20% after recently exercising an option to increase its stake in the music giant to a valuation of € 30 billion, or $ 36 billion. The remaining 60% will be returned to Vivendi investors as part of a special distribution.
For years, shareholders have been pushing for this to be a way to unlock value in the music industry. Vivendi’s shares are trading at an average discount of around 10% to its sum of the parts valuation since late 2017, according to analysts at Barclays. Soon, investors will be able to gain direct exposure to Universal rather than having to buy shares in the sprawling French conglomerate.
Although organizers of live concerts are suffering during the pandemic, streaming services have benefited as consumers spend more time listening to music. Spotify increased its monthly active users to 345 million in the fourth quarter of 2020, a 27% increase from the same period a year earlier. As a result, major record companies like Universal and Warner are collecting more royalties from digital music platforms. In the third quarter, Universal’s streaming revenue grew 23%, the fastest growth recorded since early 2019.
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