Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Vivendi's music unit UMG worth more than $40 billion, CEO says

Published 11/17/2017, 10:15 AM
Updated 11/17/2017, 10:15 AM
© Reuters. Vivendi's CEO Puyfontaine attends a conference at the Cannes Lions Festival

© Reuters. Vivendi's CEO Puyfontaine attends a conference at the Cannes Lions Festival

By Mathieu Rosemain and Sophie Sassard

BARCELONA/LONDON (Reuters) - Vivendi's Universal Music Group (UMG) could be worth more than $40 billion, Chief Executive Arnaud de Puyfontaine said on Friday, helping buoy shares in the French media group following third-quarter results where UMG was a highlight.

Vivendi (PA:VIV) has floated the idea that UMG, the world's biggest music label, could be ripe for a stock market listing, boosting the group's shares in recent months amid concerns about its investments in Italy.

Shares in Vivendi were up 4 percent at 1450 GMT, after falling in early trade. Strong trends in UMG and signs of recovery at Vivendi's Canal Plus unit helped offset overall third-quarter results that fell short of analyst forecasts on Thursday.

Asked about UMG's valuation at the Morgan Stanley (NYSE:MS) European Technology, Media and Telecoms conference in Barcelona, de Puyfontaine said he had seen an estimate this week that valued the division at $40 billion.

"I wouldn't put a number, but I think that number is higher than the highest one that is currently expressed by the markets," he said. When asked if he thought UMG was worth more than $40 billion, he said: "yes".

In April, Vivendi General Counsel Frederic Crepin had said estimates given by banks proposing a listing for UMG had valued the business at up to 20 billion euros.

While UMG has significant growth potential as the leading player in a market dominated by three global music labels which pocket the largest part of streaming revenues, Louis Citroen, an analyst at independent firm Arete Research, said he currently valued the business at 18 billion euros ($21 billion).

The rising value of UMG - which has a partnership with music streaming business Spotify - has also fueled speculation that Vivendi, chaired and controlled by billionaire Vincent Bollore, could sell a minority stake of the music division.

"This is an option," de Puyfontaine said when asked about it. "We are not pro-actively working on that option," he added.

Vivendi has built up stakes in Telecom Italia (MI:TLIT), MediaSet and video games group Ubisoft, and it bought advertiser Havas this year.

Its shares are up by around 20 percent in 2017, outperforming a 6 percent decline on the STOXX Europe Media & Publishing index.

TRICKY VALUATIONS

UMG's core operating profit jumped 25.5 percent, excluding currency moves, acquisitions and disposals, in the first nine months of the year to 442 million euros ($521 million), helped by rising revenues.

But that might not be enough in itself to justify such high valuations, said Mark Mulligan, a senior music analyst at MIDIA.

"The traditional ways of valuing record labels are becoming less useful," he said. "Especially the value of catalog which is becoming less valuable as we are moving away from the age of greatest hits albums and classic album re-releases."

Interest in a potential UMG flotation comes as investors as trying to gauge the main beneficiaries of the digitalization of music products: distributors such as Spotify, or rights owners such as UMG.

Spotify is gearing up to file for an initial public offering (IPO) late this year in order to float in the first quarter of 2018, sources have told Reuters.

© Reuters. Vivendi's CEO Puyfontaine attends a conference at the Cannes Lions Festival

The listing would value the platform at $16-$20 billion, sources said in September.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.