Vivendi SE shares rose sharply Monday after the European media giant said Saturday that it plans to distribute 60% of its subsidiary Universal Music Group’s capital to shareholders and to spin off its profitable music label by year’s end.
Vivendi saw shares up 17.9% at $37.40, while shares of French company Bollore SE, which owns roughly 27% of Vivendi’s capital, are up 13.7%.
“Vivendi’s leading institutional shareholders have been pressing for a number of years for a split or the distribution of Universal Music Group to reduce Vivendi’s conglomerate discount,” Vivendi said.
The distribution of UMG’s shares to investors would be in the form of a special dividend, Vivendi said.
Vivendi had set a minimum target for the enterprise value of UMG--which would seek listing on Euronext in Amsterdam--at EUR30 billion ($36.36 billion), it said. It had announced plans for a listing of the world’s largest music business around a year ago.
Late last year, Chinese internet company Tencent Holdings Ltd. doubled its stake in the music giant behind Ariana Grande and Billie Eilish in a deal that valued UMG at EUR30 billion. The Tencent-led consortium now owns 20% of UMG. After the planned spinoff, Vivendi would keep only 20% of UMG’s share capital.
The plan will strongly benefit shareholders, Citi said. “It is the first time Vivendi has made a major attempt to disintermediate itself when it comes to the capital reduction in music, giving its own shareholders direct participation in UMG upside,” the bank said.
Citi said that after the planned spinoff Vivendi’s revenue--on a pro forma basis--will fall to EUR9 billion from roughly EUR17 billion and its earnings before interest, taxes, and amortization will decline to around EUR950 million from around EUR2 billion.
In addition, Vivendi proposed an ordinary dividend of EUR0.60 a share for fiscal year 2020.