Project Description

Vivendi Spin-off (Universal Music) Notes

August 26, 2021 Notes

While not strictly spin-off news, Bill Ackman’s Spac (PSTH) announced Friday morning that it would be purchasing  a 10% stake of Universal Music Group (UMG) from Vivendi (VIV). UMG being a spin-off of VIV, a French media conglomerate that wanted to complete  the transaction by year end. 

It’s been just over a year since Ackman filed to raise PSTH in late May 2020, and with such a fast recovery from the pandemic, it has been hard to find deals (lots of competition). And with PSTH having a two year life, Ackman was under presser to secure a deal this year or he would have to liquidate the fund back to investors. So in a rather complex deal, Ackman’s Spac PSTH will be split into three separate vehicles. The deal, as stands, means that PSTH will use $4.1B (roughly 73% of its $5.6B in cash) to buy the 10% stack for a $40B valuation. 

On paper this seems like a reasonable deal for all parties. For Vivendi, the deal helps its minority shareholders dodge some of the tax hit that they would have seen from the Spin-off of UMG, while also giving VIV the cash to buyback shares post-spin. Looking at the transaction PSTC is getting UMG for ~21x EBITDA, which next to WMG (their best trading comp) trades for ~20x. So while this is a premium, it’s a justifiable premium being that UMG is a bigger label and with its larger catalogue has a higher chance of growth at a quicker rate to WMG.

February 19, 2021 Notes

  • Vivendi announced that it is exploring spinning off a portion of Universal Music Group in part to reduce Vivendi’s conglomerate discount.
  • Vivendi recently completed the sale of 10% of Universal to Tencent at a 30 billion euro valuation, increasing Tencent’s ownership stake to 20%.
  • Vivendi plans to retain 20% of Universal and potentially distribute the remaining 60% of the company to Vivendi shareholders.
  • Universal Music has been doing very well recently due tp surging popularity of streaming offsetting drops in publishing and advertising revenue due to the pandemic.
  • Originally, Vivendi had planned to complete the spin-off in 2023 but has accelerated those plans.
  • Universal Music is the worlds largest record label and represents many famous artists including Taylor Swift and Lady Gaga.
  • Universal will list in the Netherlands.
  • Currently, Vivendi has a 35 billion euro market cap.
  • UBS estimates it will be worth 18.4 billion euros (including its 20% stake in Universal). Vivendi shareholders will also receive their pro rate share of Universal worth ~18 billion euros (60% x 30billion euros). Thus, Vivendi appears to be trading roughly inline with its sum-of-the-parts valuation.