Kanye and Gaga Universal Music spin-off boosts Vivendi shares

LaToya Harding
·3 min read
Vice President-elect Kamala Harris listens as US singer Lady Gaga sings the National Anthem during the 59th Presidential Inauguration on January 20, 2021, at the US Capitol in Washington, DC. (Photo by Andrew CABALLERO-REYNOLDS / AFP) (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)
US singer Lady Gaga sings the National Anthem during the 59th Presidential Inauguration in January. Universal Music Group includes artists such as Gaga, Kanye West and Taylor Swift. Photo: CABALLERO-REYNOLDS / AFP

Vivendi (VIV.PA) shares received a boost from investors on Monday after it revealed plans to spin off Universal Music as a €30bn (£26bn, $36bn) standalone company.

The French firm, whose artists include the likes of Lady Gaga, Kanye West and Taylor Swift, said the music group will be listed in Amsterdam by the end of the year if the deal goes through.

It will create the world’s largest music company and give billionaire owner Vincent Bollore more control to acquire other companies in the publishing, communications and television industries.

Some 60% of the group’s share capital will be distributed to shareholders, who will vote on the move at a meeting next month.

The news sent shares soaring just over fifth higher on Monday afternoon in London, valuing the company at €37bn.

Vivendi owns 80% of Universal after selling a 20% stake to a consortium led by Chinese firm Tencent (TME), who upped their stake from 10% in January.

The company said: "Vivendi's leading institutional shareholders have been pressing for a number of years for a split or the distribution of Universal Music Group.”

Taylor Swift presents the Video Vanguard Award to Kanye West at the 2015 MTV Video Music Awards in Los Angeles, California, August 30, 2015.   REUTERS/Mario Anzuoni (TPX IMAGES OF THE DAY)
Kanye West and taylor Swift are both signed to Universal Music Group. Photo: REUTERS/Mario Anzuoni

In December, Universal bought the rights to Bob Dylan's entire back catalogue in a deal worth more than $300m.

The news follows rival Warner Music (WMG) going public mid-last year. Warner, which returned to the public market after nearly a decade of entirely private ownership, has seen the company climb from a £16bn valuation to $19bn.

BofA Securities said: "This is a positive outcome for Vivendi shareholders as we think the spin out will highlight a significantly higher-than-expected valuation for Universal Music Group.

"Owing to growth in streaming penetration, new forms of monetisation - gaming, fitness, social media - and market share gains, we model Universal revenues/EBITDA at 10/18% three year compound annual growth rate."

READ MORE: Metallica and Michael Bublé song rights sold in latest industry deal

In the UK, the music industry has also been hit by the current health crisis, with Britain likely to see most summer festivals cancelled even if vaccines are rapidly rolled out in the months to come.

Last month, music industry bosses hit out at news that the UK government rejected an offer of visa-free tours by musicians to EU countries.

A “standard” proposal exempting performers from extra costs and bureaucracy for 90 days was turned down, because the UK would not offer a reciprocal deal to EU artists visiting this country.

The Musicians’ Union said it had been assured by ministers for many months that the creative arts and music industry in particular was a priority. It said the government would put it “front-of-mind during discussions with the EU.”

Horace Trubridge, MU General Secretary, said: “With the British music business having been devastated by Covid-19 and with no end in sight to the black hole of cancelled concerts, tours, festivals and regular gigs that is the very bedrock of our world-class industry, the news, if true, that our own elected representatives chose to turn down such an offer is nigh-on unbelievable.

“Ever since the result of the referendum in 2016, the MU has campaigned and lobbied for a Musicians’ Passport that would allow our members and their support crew to make a successful living across Europe,” Trubridge continued.

“This campaign has been backed by all sides of the industry and current petitions, signed by hundreds of thousands of musicians, industry workers and supporters, illustrate just how vital the freedom of economic movement is to our industry worth £5.8bn to the UK.”

WATCH: What UK government COVID-19 support is available?