Vivendi awaits key shareholder vote on Common Music Group spin-off

Taylor Swift performs onstage during the Taylor Swift reputation Stadium Tour at Mercedes-Benz Stadium on August 11, 2018 in Atlanta, Georgia.

John Shearer – TAS18 – Getty Images for TAS

French media group Vivendi is awaiting a crunch vote from investors on its proposed spin-off of the iconic Universal Music Group.

If approved, the world’s largest music label — home to stars including Lady Gaga and Taylor Swift — will complete its listing on the Euronext Amsterdam in late September, Vivendi has said.

Shareholders are due to vote on the proposal Tuesday.

It comes after billionaire investor William Ackman’s SPAC Pershing Square Tontine Holdings signed a deal to buy 10% of UMG for around $4 billion, the companies announced over the weekend. The deal gave UMG an enterprise value of 35 billion euros ($41.55 billion) for 100% of its share capital.

A consortium led by Chinese titan Tencent Holdings already owns a 20% equity stake in the group. UMG accounts for around three quarters of Vivendi’s profits.

Vivendi’s shareholder meeting commenced at 9 a.m. London time. Investors will vote on the proposed distribution of 60% of UMG’s share capital to shareholders through the public listing in Amsterdam.

Although the spin-off is expected to secure backing at the initial meeting, criticisms have been levelled by activist hedge funds Artisan Partners and Bluebell, who claim it disproportionately benefits larger shareholders, including Vincent Bollore, over smaller investors.

French billionaire businessman Bollore holds 30% of the voting rights in UMG. For the spin-off to pass, 50% need to vote in favor.

“Assuming the French regulators don’t intervene at any stage as some of the activists have called them to, it would seem that only passing an ordinary resolution with a simple majority should be enough for Vivendi today,” said Matti Littunen, European media analyst at Bernstein.

However, Littunen noted that some investors had reservations about the tax implications for smaller shareholders, along with questions about why Vivendi is not spinning off a larger share of the business, opting instead to sell small portions to entities such as Ackman’s SPAC.

“Why sell some of it for cash and not distribute more to shareholders and let them figure out what to do with the proceeds?” he told CNBC’s “Street Signs Europe” on Tuesday.

“In general, there is still lots of suspicion about the capital allocation for Vivendi after this deal, so as mentioned, lots of controversial aspects to this distribution.”

Shareholders will also vote on a plan to buy back and cancel up to 50% of Vivendi’s stock, which requires two-thirds support to pass.

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