With Universal Music Group recently valued at $33 billion — as part of its agreement to did it so soon, announcing its initial public offering on Feb. 6. Underwritten by Morgan Stanley, Credit Suisse and Goldman Sachs & Co. LLC, Warner’s move came less than six weeks after UMG closed the Tencent deal, catching many observers, and even many of its senior executives, off guard.
“Just as Vivendi was able to extract a huge premium in the price that Tencent, along with its fellow investors, paid to take the stake in Universal, because it’s a rare asset in the market, Warner Music is essentially going to be doing exactly the same thing, becoming a rare and successful asset in the growing market of music catalog M&A.
Streaming accounted for 80% of U.S. music revenue in RIAA’s mid-year 2019 report, and nearly half of the global business in IFPI’s 2018 summary. There are sufficient advantages with an IPO, if the timing is good and it works well,” says Peter Alhadeff, professor in the Music Business program at Berklee College of Music. “It’s a play for shareholder value.
Tencent itself represents an odd bond between Universal and Warner, as the S-1 filing attached to the latter’s IPO reveals that Warner Music is an investor of the Chinese company. Warner’s parent, Access, also holds a controlling stake in Deezer, the French streaming company.
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