Mad for Music: Europe’s Largest Label Listing​

By Rachel Strickland​


The Story

Universal Music Group (UMG), the company behind platinum-selling artists such as Lady Gaga, Bob Dylan and Taylor Swift, has claimed the title of Europe’s largest listing of the year so far (CNBC).

In a spin-off by parent company Vivendi, 60% of UMG’s shares were distributed to shareholders before the company was listed on the Euronext Amsterdam Exchange - reaching a valuation of €45.5 billion. This comes after a Tencent-led consortium bought 20% of the company in 2019, and hedge fund Pershing Square bought 10% this year (Financial Times).

Having previously rejected an $8.5 billion offer from SoftBank in 2013, shareholders agreed to a spin-off at an AGM in June. A spin-off involves divesting part of a business and may be used to release value from a subsidiary within a larger conglomerate business. In this case, Vivendi stated the spin-off would “reduce the conglomerate discount on the Vivendi share price” (Vivendi Press Release).

What it Means for Businesses and Law Firms

Described an “an extraordinary asset” by JP Morgan, it is hoped that the huge growth in streaming subscriptions services such as Spotify will translate into growth for UMG, which relies on collecting royalties (Financial Times). UMG has also recently agreed new avenues of monetisation, by striking deals with companies such as Peloton and TikTok to license their music (Financial Times).

However, cynics may argue that now is a good time to cash-in on their investment as some streaming markets become saturated and fears grow that valuations are at their peak. In addition, nearly half of UMG’s recorded music revenue comes from new songs (less than three years old), meaning that UMG needs to relentlessly search for fresh talent. Further, there are concerns over the future, where artists may be able to sidestep the need for a label by selling straight to the consumer (Financial Times).

As for competitors, the controlling shareholder of Warner Music Group Corp (WMG) listed the company on the NASDAQ last year (Forbes; Financial Times). Benefitting from investor enthusiasm in the industry, WMG experienced a 13.2% increase in their share price on UMG’s market debut (billboard.com). Spotify also completed a direct listing on the New York Stock Exchange in 2018 (CNBC).

Law Firms Involved: A team fielded by Freshfields Bruckhaus Deringer across the US and the Netherlands advised UMG. The firm was involved in both the 60% share spin-off and the listing.