Universal said to eye industry bidder as buyout firms balk

By BLOOMBERG

LOS ANGELES • Vivendi SA is targeting strategic buyers for a stake in Universal Music Group (UMG) as some private equity (PE) investors balk at the high price and slow pace of the deal, according to people familiar with the matter.

The French company has floated a partial sale or an initial public offering of UMG for years and said in July it would try to sell as much as 50% of the world’s largest record group.

Yet, Vivendi still hasn’t formally hired advisors after multiple pitches, and several financial investors have lost interest, said the people, who asked not to be identified discussing private deliberations.

Vivendi has held talks with companies including Tencent Holdings Ltd about a minority investment, which could help UMG expand internationally including in China, said two of the people.

But a sale to the Chinese could also raise the ire of officials in the US, the biggest music market, amid trade tensions, one of them said.

Some suitors have also been dismayed by the minimum value of €25 billion (RM116.75 billion) to €30 billion that Vivendi is seeking for the business, the people said.

Analysts’ estimates for UMG vary from US$20 billion (RM84 billion) to US$50 billion.

While the company only wants to sell a minority stake so far, some potential advisors have floated the idea of a majority stake to gauge interest and test valuations, they said.

UMG — home to artists Taylor Swift, Kanye West and Drake — has attracted PE firms, sovereign wealth funds, and media and technology companies looking to grab a piece of the resurgent industry.

But some of the initial enthusiasm has turned to frustration as the preparation creeps along, the people said.

When Vivendi outlined plans for the sale in July, it said the process could be completed within 18 months.

By November, Vivendi said it was holding working sessions with banks, then in February predicted a final selection in the coming weeks.

In April, it said that the selection should be completed “shortly”, and that the process was being conducted “calmly, deliberately and without haste”.

PE firms and sovereign wealth funds, which had engaged consultants to advise them on potential offers, have since tabled their efforts until Vivendi signals the sale will proceed, two of the people familiar with the matter said. Vivendi shares fell as much as 3% in early trading in Paris yesterday.

“When I think about the UMG deal, I think about the play ‘Waiting for Godot’,” Macquarie Group Ltd analyst Giasone Salati said in an email.

“Why pre-announce the deal such a long time in advance instead of just doing so once the deal has been agreed upon? Still, maybe it helps the stock price of Vivendi.”

Vivendi shares have gained 24% over the past two years, valuing the company at about €31.5 billion, compared to a 0.6% gain for the Stoxx Europe 600 Media Index. — Bloomberg