In the 10 months since Vivendi confirmed that it is seeking a buyer for as much as 50% of Universal Music Group, the industry has watched analysts’ proposed valuations of the company balloon from an initial $22 billion to as much as $50 billion.
But according to a report in Bloomberg, private equity investors have been losing interest due to the high price of the company — which sources said ranges between $28 billion and $33 billion — and the slow pace of the deal, leading Vivendi to enter talks with other companies, including Chinese giant Tencent, which has been among the reported interested parties for several months.
UMG is by far the world’s largest music company, with recorded-music, publishing, merchandise, management and other divisions and a sprawling roster that includes Taylor Swift, Drake, Lady Gaga, Kanye West, Kacey Musgraves and many other superstar artists. A deal with Tencent would elevate UMG’s already formidable international presence in the tightly controlled Chinese market; however, a different set of problems has emerged in recent weeks due to trade tensions between China and the U.S.
Reps for UMG, Vivendi and Tencent did not immediately respond to Variety’s requests for comment.
Rumors about the sale began some months before Vivendi confirmed its plans last July, and in the months since the process has moved slowly. According to the report, Vivendi has yet to hire formal advisors, despite UMG technically being on the market for many months.
Many insiders have expressed skepticism about the deal as proposed, noting that few companies or investors would pay such a steep price for an essentially passive role in UMG; several said they found it hard to imagine Lucian Grainge, UMG’s chairman and CEO (pictured above), sharing decision-making with an outside party. According to the report, some potential advisers have floated the idea of a majority stake. Over the past few months, interested parties have included SiriusXM/Pandora owner Liberty Media Corp. — which is also a partial owner of the world’s largest live-entertainment company, Live Nation — Apple, Chinese technology firm Alibaba and KKR & Co.
In an earnings report released by Vivendi in February, UMG clocked total annual revenues of approximately $7.15 billion, a 10% increase at constant currency over 2017. The company continues to be a primary driver of Vivendi’s revenue: “For the second half of 2018, at constant currency and perimeter, Vivendi’s revenues increased by 5.7% compared to the second half of 2017, an improvement compared to the first half of 2018 (+3.9% compared to the first half of 2017), mainly driven by Universal Music Group (+12.8% for the second half, compared to +6.8% for the first half),” the report reads.
UMG is a crown jewel in the otherwise-tepid Vivendi holdings, and has helped the company’s shares gain 24% over the past two years.