UPDATE 4-Vivendi presses on with UMG stake sale as music arm drives revenue

By Sudip Kar-Gupta and Gwénaëlle Barzic
Updated

* PWC conducting due diligence on UMG deal

* Vivendi Q1 sales up 10.7 pct, shares rise

* Hits from Ariana Grande buoy UMG's sales (Adds more detail and background)

By Sudip Kar-Gupta and Gwénaëlle Barzic

PARIS, April 15 (Reuters) - France's Vivendi said on Monday it was forging ahead with the planned sale of up to 50 percent of its Universal Music Group (UMG), as the iconic division boosted the media conglomerate's quarterly revenue.

Vivendi plans to sell the UMG stake, which some analysts have valued at 40 billion euros ($45.2 billion), to maximize the music arm's value and help fund purchases of other businesses.

The growing public demand for subscription and ad-based music streaming services, and the recent signing of several major license deals, have put the owners of music rights such as UMG in the spotlight of investors as they compete with streaming platforms such as Spotify.

UMG is the world's biggest music labels ahead of Sony Music Entertainment and Warner Music, and its soaring profit have been key drivers of Vivendi's stock price.

Vivendi's first quarter sales jumped 10.7 percent from last year to 3.46 billion euros, boosted by UMG and Vivendi's recent acquisition of the Editis publishing business.

Vivendi shares were up 0.8 percent in late trading as analysts welcomed further strong figures from UMG, which offset lower sales at Vivendi's Canal Plus TV unit.

UMG's revenue rose 22.9 percent to 1.5 billion euros, helped by chart-topping songs from U.S. pop star Ariana Grande and sales from the soundtrack of hit movie "A Star Is Born."

Most of its revenue comes from streaming, and some analysts said it might be hard for UMG to maintain that level of growth, although its sales figures were nevertheless reassuring.

"UMG's strong figures are timely, given Vivendi's plans to sell up to 50 percent of the business, and they should help to bring about a high market valuation for UMG," said Roche Brune Asset Management fund manager Gregoire Laverne.

Analysts at brokerage Liberum echoed that view, keeping a "buy" rating on Vivendi's shares.

TENCENT MUSIC ON THE SCENE

Vivendi has said it could sell up to 50 percent of UMG to one or more strategic partners. Analysts value the stake at between 20 billion euros and 40 billion euros.

U.S. buyout firm KKR and China's Tencent Music Entertainment Group were exploring rival bids for the UMG stake, sources familiar with the matter told Reuters in February.

Liberty Media has also said it would look into it. Analysts have also mentioned Google, Facebook, Amazon , Alibaba and Apple as potential buyers.

Vivendi said on Monday it was finalizing which banks would advise it on the UMG deal, adding that accountancy and consultancy firm PWC was also conducting due diligence on UMG.

Vincent Bollore, whose company Bollore Group owns about 26 percent of Vivendi's share capital, is to be formally replaced by his son Cyrille on the company's board this month.

($1 = 0.8841 euros)

($1 = 6.7046 Chinese yuan renminbi) (Reporting by Sudip Kar-Gupta; Editing by Emelia Sithole-Matarise)