Universal Music goes public in IPO

STAR POWER:
Shares of UMG, the world’s largest label with a catalog of 4 million tracks featuring artists such as Metallica and Taylor Swift, rose 35% when they debuted

Shares of Universal Music Group (UMG), whose lineup includes The Beatles and Taylor Swift, soared during the label’s stock market debut yesterday, boosting confidence in one of the largest Initial Public Offerings (IPOs) of recent years.

The music giant was launched by its owner, French media giant Vivendi SA, whose shares went from a first price of 18.50 euros to over 25 euros on the Euronext Amsterdam index.

The world’s largest label, with a catalog of 4 million tracks, was valued at $ 39 billion on the eve of its market launch.

Vivendi’s shares, on the other hand, fell more than 15% on the Paris CAC 40 stock exchange as the media company shed a controlling stake in its crown jewel.

Vivendi is owned by French billionaire Vincent Bolloré.

Although Vivendi has retained part of Universal Music, it seeks to focus more on television, advertising and publishing. Universal Music, like rivals Warner Music Group Corp and Sony Music Entertainment, was once threatened by music piracy, but profits have skyrocketed in the age of streaming.

It’s home to many of the world’s biggest music stars, from Lady Gaga to Kanye West to Metallica.

Last year, the band bought Bob Dylan’s entire catalog of songs for $ 300 million, one of the biggest acquisitions in music history.

Based in Santa Monica, Calif., UMG has been a cash cow for Vivendi’s media empire, with sales of 7.4 billion euros ($ 8.7 billion) last year, representing 46% of the turnover of the parent company.

However, as it moved into other areas, Vivendi sold a 20 percent stake in Universal to Chinese technology company 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 its parts,” said Arnaud de Puyfontaine, CEO of Vivendi.

Aware that disposing of its No. 1 asset could be a risky operation, Vivendi has taken measures – described as “quite extraordinary” by an activist shareholder – to protect its own stock market price.

It got its investors’ consent for a massive buyback of up to half of its shares following UMG’s IPO, but that didn’t stop them from falling yesterday.

The objective was to give the company the means to protect itself from a hostile takeover bid in the event of a drop in its share price after the sale.

Yesterday’s deal involved Vivendi distributing 60 percent of UMG’s shares to its investors, while the French company kept 10 percent and maintained a joint management agreement with Tencent.

Bolloré must remain a powerful figure at UMG, taking 18% of the issued shares, worth before the IPO of around 6 billion euros, and a seat on its new board of directors.

A prospectus for the IPO says that UMG’s three main operational activities are recorded music, music publishing and advertising, but that it is also expanding in areas such as live events, broadcasting live, movies, television and podcasts.