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The Paris-based company Vivendi stated that its board had set a “minimum target of €30bn” of valuation for Universal Music.
Vivendi SA (PA: VIV) shares jumped by over 23% on record after the company announced it may spin off its biggest and most profitable business Universal Music Group by the end of 2021. Vivendi also plans to distribute 60% of the company’s shares capital to its investors by the end of the year in a move to capitalise on the rising value of music assets.
Vivendi shares opened 22% higher in Paris and climbed as much as 24% on February 15, its biggest-ever one-day gain since they were listed in 1989. Shares in Bollore SA, the majority holder of Vivendi with more than a quarter shares, also saw an 18% rise.
A vote of the proposal has been scheduled for the latter stages of March and if it is approved by shareholders, the divestment will make Universal Music group an independent company with Vivendi owning just a 20% stake. Vivendi’s business will shrink a bit once it spins out Universal Music Group and will focus solely on, communication agency Havas, mobile games publisher Gameloft, France with pay-TV operator Canal Plus and book publisher Editis.
The French media conglomerate will however be equipped with more firepower as reports suggest billionaire owner Vincent Bolloré will make acquisitions in other areas such as publishing, television, and communications.
The Paris-based company laid out the plan in a statement on Saturday and stated that its board had set a “minimum target of €30bn” of valuation for the recording company. Tencent, a Chinese multinational technology conglomerate exercised its option to purchase a further 10% of UMG at that valuation and that decision took its total stake to 20%.
“The transaction completed in recent days on that basis , as well as interests expressed by other investors at potentially higher prices, have now enabled the management board to consider a distribution of 60% of UMG’s share capital to Vivendi shareholders,” Vivendi stated.
The company’s shareholders would also get an “exceptional distribution” in the renovated UMG shares which would then be listed in Amsterdam where the company would be incorporated. Bolloré turned down an offer from SoftBank for Universal Music Group worth €6.5 billion back in 2013, a decision which threw the company into a pool of speculation as to what they planned to do with the recording company.
In 2017, Vivendi again considered listing UMG on public markets but later circled back on the decision in 2018 stating that it was looking to sell up to half the company subsequently leading to the deal with Tencent.
Universal Music group is the largest in the world as it boasts of Grammy winning artists including Lady Gaga and Kanye West. The company accounted for 45% of Vivendi’s €15.9 billion in sales and 73% its €1.5 billion operating profit.