The table below shows our estimates of the value of Vivendi.
For my more financially inclined readers, continue on for details on how we estimated Vivendi’s value.
UMG Valuation Notes
To estimate the value of UMG, we assembled a list of transactions involving music companies and the prices at which those transactions occurred.
Most deals have been done at about 9 to 10 times EBITDA for mixed publishing and recording businesses and at 12 to 14 times EBITDA for the higher margin publishing companies versus 5 to 7 times EBITDA for lower margin recording businesses. For the base case estimate, we valued UMG at 9 times EBITDA, which is admittedly on the lower end of historical valuations. For the aggressive case, we valued UMG at 1.17 times revenue, which is on the higher end of historical revenue multiples. For our conservative case, we split UMG between its recorded music and publishing divisions* and valued each on the lower end of comparable EBITDA multiples (6 times for recorded music and 13 times for publishing).
*We valued EBITDA classified as “other” at 9 times.
SFR Valuation Notes
Valuing SFR is rather straightforward, if you assume Vivendi’s previous management knew what they were doing. In 2011, Vivendi owned 56 percent of SFR and purchased the remaining 44 percent from Vodafone Group Plc (NASDAQ:VOD) (LON:VOD) for EUR 7.75B, which would value all of SFR at EUR 17.6B. Considering SFR is facing increased competition from low-cost telecom provider Iliad SA and profits at SFR are falling, it is probably prudent to assume Vivendi management overpaid for SFR when acquiring the remaining 44 percent stake.
The following table shows the EV/EBITDA multiple of comparable telecom transactions.
