By Mathieu Rosemain
PARIS -Vivendi's most prized division Universal, the music label behind artists like Justin Bieber and Taylor Swift, drove group first-half results, bolstering its position two months before its planned spin-off and listing in Amsterdam.
The transaction, carefully designed over the last two years by Vivendi's top investor, Vincent Bollore, aims to cash in on the music industry rebound, underpinned by booming streaming revenues but also a recent surge in sales of vinyl records and CDs.
With an estimated enterprise value of 35 billion euros ($41 billion), according to Vivendi, Universal Music Group (UMG) is worth more than the market value of its own parent company.
The spin-off involves the distribution of 60% of Universal's shares to Vivendi's shareholders.
The deal has become high profile in the United States, as billionaire Bill Ackman plans to buy 10% in the company after he failed to do so via a special purpose acquisition company (SPAC).
Universal's core profits represented about three quarters of Vivendi's first-half earning before interest, tax and amortisation (EBITA), at 753 million euros.
Vivendi's other key subsidiaries, pay-TV Canal Plus, advertising group Havas and publishing unit Editis, also contributed to core profits, which rose by 49% from a year earlier.
Group revenues over the period were up by 12% to 8.22 billion euros.
While benefiting Vivendi's shareholders in the short term, the separation of Universal would strip the group of its most valuable asset, which represents 75% of the group's total valuation, according to broker Bryan Garnier.
During the call, several analysts pressed Vivendi's management about what the company could do to support the stock's price following Universal's spin-off.
Chief Financial Officer Hervé Philippe said that a shares buyback programme was "absolutely a possibility".
Analysts also asked about the mounting challenge faced by Canal Plus after e-commerce giant Amazon recently seized most of France's broadcasting rights for the Ligue 1 soccer matches.
The move could be a game changer for the French TV market, biting Canal Plus' market share in what used to be its main turf.
"We've got a problem," Vivendi's chief executive Arnaud de Puyfontaine said, insisting that the price the pay-TV was paying for the remaining matches it could broadcast was too high compared to what Amazon would pay.
Several legal procedures were under way, he said.
Universal's market debut and spin-off are scheduled for Sept. 21, Vivendi confirmed. Universal will hold a capital markets day of briefings for analysts and investors on Aug. 25, it said.
