The largest music company in the world is finally going solo, although it is not in the usual place.
On Saturday, the French owner of Universal Music Group, Vivendi, said he would give up the music business and list it in the Netherlands at the end of this year. It has already addressed the idea of releasing the record label working with Lady Gaga and Taylor Swift in 2022. Investors’ strong appetite for music assets since the beginning of the pandemic could explain the accelerated timetable. The news made Vivendi shares rise by a fifth on Monday.
Once the spinoff is complete, the French company led by billionaire Vincent Bolloré will still own a fifth of Universal. Chinese technology giant Tencent will hold 20% after recently exercising an option to increase its shareholding in the music giant to a valuation of EUR 30 billion – the equivalent of $ 36 billion -. The remaining 60% will be handed over to Vivendi investors in a special distribution.
Shareholders have been pushing for this move as a way to unlock value in the music business for years. Vivendi shares traded down an average of about 10% at the valuation of the parties’ amounts at the end of 2017, according to Barclays analysts. Investors will soon be able to gain direct exposure to Universal, rather than buy shares in the French conglomerate.
Although live concert organizers suffer during the pandemic, streaming services have benefited, with consumers spending more time listening to music. Spotify increased its monthly active users to 345 million in the fourth quarter of 2020, an increase of 27% compared to the same period last year. As a result, major record labels, such as Universal and Warner, are earning more royalties on digital music platforms. In the third quarter, Universal’s streaming revenue increased by 23%, the fastest growth it has seen since early 2019.