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Vivendi ‘Not in a Hurry’ to Sell Universal Music Group

Jem Aswad

Yannick Bollore, chairman of the supervisory board of Universal Music Group parent company Vivendi, implicitly extended the projections for the sale of UMG by around six months in a interview today. He said Vivendi is “not in a hurry” to wrap the sale and is “very confident” it will find the right partner to purchase up to 50% of the world’s largest music company.

“We didn’t say we want to spin off UMG,” he said, responding to a question from a Bloomberg reporter. “The supervisory board of Vivendi is working with the [UMG] management board to find the [right] financial partner. As you may know, the music industry is going through huge growth and the business is thriving, and we want to make sure we can accelerate the growth in the coming years so we have communicated that we want to open the process before the end of 2019 and the management is still very confident the process is on track.”

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Asked about the extension of projected sale dates, which had previously slotted an opening for mid-2019 and a close by early next year, Bollore responded, “We are not in a hurry — Vivendi is doing very well and UMG is doing very well. The question is how to find the right partner.

“But, once again, everything’s fine — trust me.”

In the 10 months since Vivendi confirmed that it is seeking a buyer for as much as 50% of Universal Music Group, the industry has watched analysts’ proposed valuations of the company balloon from an initial $22 billion to as much as $50 billion.

But sources say that private equity investors have been losing interest due to the high price of the company — which sources said ranges between $28 billion and $33 billion, and some as high as $45 billion — and the slow pace of the deal, leading Vivendi to enter talks with other companies, including Chinese giant Tencent, which has been among the reported interested parties for several months.

Estimates of the company’s value have not been enhanced by the controversy surrounding a massive 2008 fire in which an estimated 500,000 master recordings from the company’s vast archive were destroyed, as revealed by a New York Times article.

UMG is by far the world’s largest music company, with recorded-music, publishing, merchandise, management and other divisions and a sprawling roster that includes Taylor Swift, Drake, Lady Gaga, Kanye West, Kacey Musgraves and many other superstar artists. A deal with Tencent would elevate UMG’s already formidable international presence in the tightly controlled Chinese market; however, a different set of problems has emerged in recent weeks due to trade tensions between China and the U.S.

A rep for Vivendi  did not immediately respond to Variety’s requests for comment.

Many insiders have expressed skepticism about the deal as proposed, noting that few companies or investors would pay such a steep price for an essentially passive role in UMG; several said they found it hard to imagine Lucian Grainge, UMG’s chairman and CEO, sharing decision-making with an outside party. Over the past few months, interested parties have included SiriusXM/Pandora owner Liberty Media Corp. — which is also a partial owner of the world’s largest live-entertainment company, Live Nation — Apple,  Chinese technology firm Alibaba and KKR & Co.

In an earnings report released by Vivendi in February, UMG clocked total annual revenues of approximately $7.15 billion, a 10% increase at constant currency over 2017. The company continues to be a primary driver of Vivendi’s revenue: “For the second half of 2018, at constant currency and perimeter, Vivendi’s revenues increased by 5.7% compared to the second half of 2017, an improvement compared to the first half of 2018 (+3.9% compared to the first half of 2017), mainly driven by Universal Music Group (+12.8% for the second half, compared to +6.8% for the first half),” the report reads.

UMG is a crown jewel in the otherwise-tepid Vivendi holdings, and has helped the company’s shares gain 24% over the past two years.

 

 

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