Vivendi to Discuss Universal Music Group IPO Ideas at May 17 Board Meeting

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Sir Lucian Grainge, Chairman and CEO UMG, attends the Universal Music Group's 2017 Grammy After Party at The Theatre at Ace Hotel on Feb. 12, 2017 in Los Angeles.

Vivendi has announced that its management board will present its initial findings on how a Universal Music Group IPO might play out. In a press release on Tuesday, the French multinational media conglomerate said that its board will discuss the "different hypotheses" on May 17.

UMG is Vivendi's largest asset and the world's biggest label with a roster including Drake, Taylor Swift, Rihanna, Jay-Z, The Beatles and more. Last year, the company's revenue increased 10 percent, thanks largely to growing streaming revenues.

Vivendi CEO Arnaud de Puyfontaine confirmed the company's intentions in February at a shareholder meeting in Paris, saying "we have started work that will allow us to present the benefits of a potential listing of UMG to the supervisory board." At the same meeting, general counsel Frederic Crepin told those gathered that investment bankers estimated that if the company were to float an IPO for UMG, it could carry a valuation of up to 20 billion euros ($21.8 billion).

As early as February, Vivendi's official company line was that there were no plans to spin off UMG. Vivendi's other holdings include Canal+ Group, France's top pay TV company and the Havas Group, a large communications firm.

Reading between the lines on the one sentence announcement, one veteran Wall Street player puts it this way: "Would you say [anything] if you were about to tell the board that it [spinning off a UMG stake through an IPO] was not a good idea?"

More likely, if the decision was to not do anything and keep things the way they are, then why announce it at all except in passing when the earnings release comes out probably sometime next week? UMG didn’t respond immediately for a request to comment.

With money-losing Spotify realizing a $29 billion valuation because of its recent public listing and generating about $5 billion or less annual revenue than Universal -- which produced operating income of about $902 million on revenues of $6.4 billion in its Dec. 31, 2017 annual results -- the thinking goes that a company actually owns the copyrights like UMG has to be worth as much as the company owning the delivery mechanism to the consumer, like Spotify, thus the investor stampede aimed at getting Vivendi to cash in.