Shares of Universal Music Group (UMG), whose lineup features The Beatles and Taylor Swift, soared on the label’s stock market debut yesterday, bolstering confidence in one of the largest initial public offerings (IPOs) in the past few years.
The music giant was floated by its owner, French media giant Vivendi SA, with shares jumping from a debut price of 18.50 euros to more than 25 euros on the Euronext Amsterdam index.
The world’s biggest label, with a catalogue of 4 million titles, was valued at US$39 billion on the eve of its market introduction.
Photo: AFP
Shares of Vivendi, by contrast, sank by more than 15 percent on the Paris CAC 40 stock exchange as the media company offloaded a majority stake of its crown jewel.
Vivendi is owned by French billionaire Vincent Bollore.
Although Vivendi retained a chunk of Universal Music, it is looking to focus more on TV, advertising and publishing. Universal Music, like its rivals Warner Music Group Corp and Sony Music Entertainment, was once threatened by music piracy, but profits have soared in the age of streaming.
It is home to many of the world’s biggest music stars, from Lady Gaga to Kanye West to Metallica.
Last year, the group bought Bob Dylan’s entire song catalogue for US$300 million, one of the biggest acquisitions in music history.
Based in Santa Monica, California, UMG has been a cash cow for Vivendi’s media empire, with a turnover of 7.4 billion euros (US$8.7 billion) last year, accounting for 46 percent of the parent company’s revenue.
However, as it pivoted toward other areas, Vivendi sold off a 20 percent stake of Universal to Chinese tech firm Tencent Holdings Ltd (騰訊) and 10 percent to US financier Bill Ackman.
“We are creating the conditions so that the valuation of Vivendi as a whole is greater than the sum of the parts that compose it,” Vivendi chief executive Arnaud de Puyfontaine said.
Aware that shedding its No. 1 asset might be a risky move, Vivendi has taken steps — described as “quite extraordinary” by one activist shareholder — to protect its own share price.
It secured agreement from its investors for a massive buyback of up to half its shares following the UMG flotation, but that did not stop them from falling yesterday.
The goal was to give the firm the means to protect itself from a hostile takeover bid should its share price fall after the sale.
Yesterday’s operation involved Vivendi distributing 60 percent of UMG shares to its investors, while the French company kept 10 percent and maintained a joint management agreement with Tencent.
Bollore is to remain a powerful figure at UMG, taking 18 percent of the floated stock, worth before the floatation at about 6 billion euros, and a seat on its new board.
A prospectus for the IPO said UMG’s three main operating businesses are recorded music, music publishing and advertising, but that it is also expanding into areas such as live events, livestreaming, film, television and podcasts.
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