French media conglomerate Vivendi posted higher first-quarter revenue on Monday, and said it was forging ahead with the planned sale of up to 50 percent of its UMG music arm. Vivendi plans to sell the stake in UMG, whose soaring profit has been a key driver of the group's stock price, in order to maximise UMG's value and help fund the purchases of other businesses.
The growing public thirst for subscription and ad-based music streaming services, and the recent signing of several major licence deals, have put the owners of music rights such as UMG in investors' spotlight as they compete with streaming platforms such as Spotify.
Vivendi's sales jumped 10.7 percent from last year to 3.46 billion euros ($3.91 billion), boosted by UMG and Vivendi's recent acquisition of the Editis publishing business. A poll by In-Front Data for Reuters had forecast revenues of 3.39 billion. Vivendi shares rose 0.5 percent as analysts welcomed more strong figures from UMG.
UMG's revenues rose 22.9 percent from last year to 1.5 billion euros, helped by chart-topping songs from US pop singer Ariana Grande and sales from the soundtrack of hit movie "A Star Is Born". "Organic revenue growth at 5.7 percent was very strong, driven by over 18.8 percent organic growth at its Universal Music Group division, with recorded music up over 19 percent year-on-year organically," wrote analysts at Liberum, which kept a "buy" rating on Vivendi shares.
"This should bode well for profit growth, given it is driven by streaming, which should have a high (40+ percent) drop through rate to profits," added Liberum. Vivendi has said it could sell up to 50 percent of UMG to one or several of its strategic partners. Analysts value the stake at between 20 billion euros and 40 billion euros.
"The process of selecting the potential partnering banks and the advisers should be completed shortly. PWC has been engaged to conduct the 'vendor due diligence', which is ongoing. It is expected to be completed in the coming weeks and will be provided to the selected banks," Vivendi said in a statement. Vincent Bollore, whose holding company Bollore Group owns about 26 percent of Vivendi's share capital, is to be formally replaced by his son Cyrille on the company's board this month.