RECAPPING IPO MANIA

When Warner Music Group made the surprise announcement that it had filed a registration statement on Form S-1 with the SEC for a proposed initial public offering of its common stock on 2/6, it looked like the frontrunner for story of the year. But just seven days later, Vivendi revealed that it planned an IPO of its own for UMG.

In a press release, Vivendi said its Supervisory Board has been “informed of ongoing negotiations regarding the possible sale of additional minority interests, which negotiation engagement [with Tencent], based on a minimum valuation of €30 billion [or $32.5b], was announced on December 31, 2019.”

In a presentation to its shareholders, Vivendi noted its sale of 10% of UMG to Tencent, adding that the Chinese company has until 1/15/21 to purchase another 10% for about $3.25b. The IPO is “planned for early 2023 at the latest.” Universal’s parent company said eight banks have been asked to assist it in the planning of the IPO.

This bombshell came during Vivendi’s earnings report for fiscal 2019. It reported that UMG had record profits in 2019 of $1.21b, while revenues were up nearly 19% to $7.8b, with streaming rising 21.5% to $3.63b. Physical sales were up 3.1% to $1.1b and publishing was up 9.2% to $1.14b. With growth like that, most expect Uni’s valuation to keep climbing.

The Warner filing, meanwhile, states, in boilerplate language, that “The shares of common stock to be sold in the WMG offering are proposed to be sold by certain of WMG’s stockholders.” The number of shares of common stock to be offered and the price range for the proposed offering have yet to be determined, while the identities of those stockholders—presumably including some of WMG’s top execs—continues to be the subject of industry speculation.

Warner has tapped Morgan Stanley, Credit Suisse and Goldman Sachs to jointly manage the IPO.

WMG was publicly traded on the NYSE until Len Blavatnik’s Access Industries bought the company from an investors group led by Edgar Bronfman Jr. for $3.3 billion in 2011. Two years later, Blavatnik acquired Parlophone, EMI Classics and some other EMI assets from UMG for $765m. Since then, the streaming revolution has returned the music business to prosperity and skyrocketing Warner’s valuation.

It remains to be seen what the company’s valuation will be when trading begins. But UMG—albeit a far bigger company—was valued at around $34b following Vivendi’s sale of 10% of Uni for $3.6b in late December. That bodes well for the increasingly bullish WMG, as the still-rising tide continues to lift all boats.