Vivendi SA (EPA:VIV) rejected $8.5 billion offer from Softbank Corp (PINK:SFTBF) (TYO:9984) for Universal Music Group, reports Bloomberg’s Andy Fixmer. Sources told Bloomberg that Vivendi directors turned down the proposed acquisition relatively quickly.
Vivendi SA (EPA:VIV), which has seen slow growth in recent years, is reportedly looking to streamline its valuable holdings so that it can focus more on content. The company’s telecommunications assets are reportedly for sale, but letting go of the world’s largest music label wouldn’t have made sense with Vivendi SA (EPA:VIV)’s content-focused growth strategy.
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Softbank Corp (PINK:SFTBF) (TYO:9984), which is Japan’s third largest wireless carrier, has been looking for opportunities to expand its operations. It recently acquired a controlling share of Sprint Nextel Corporation (NYSE:S), the third largest carrier in the US, for $21.6 billion, causing Moody’s to drop its rating to junk status yesterday, from Baa3 to Ba1. A lower rating can increase borrowing costs as it indicates increased risk, but that doesn’t mean SoftBank will change its growth strategy or that it will be unable to finance future acquisitions.
“There’s a possibility remaining for Softbank Corp (PINK:SFTBF) (TYO:9984) to look for more acquisitions or growth opportunities,” said Asahi Life Asset Management senior fund manager Yoshiro Nakatani. “SoftBank is still on track for growth.”
SoftBank expanding into content delivery
Although SoftBank is primarily a wireless carrier it also makes money from content delivered to mobile users, and the proposed acquisition of Universal Music Group would have given it the ability to offer more diverse packages to its customers. It would also make Softbank Corp (PINK:SFTBF) (TYO:9984) less reliant on some of its competitors for content.
Sony’s Music Unlimited App is backed up by the world’s second largest music label, and Apple Inc. (NASDAQ:AAPL) continues to control a large share of content delivery through iTunes. Ownership of Universal Music would have given Softbank Corp (PINK:SFTBF) (TYO:9984) the clout to start its own music service and to negotiate better terms with other companies.
If that is the Softbank Corp (PINK:SFTBF) (TYO:9984)’s intention, there could easily be other offers in the near future. Analyst Tomoaki Kawasaki told Bloomberg, “SoftBank is an internet communications company, so it’s also making money from content … the attempt to buy the music business is part of that. It was unfortunate it didn’t work out this time, but [SoftBank founder Masayoshi] Son should have something up his sleeve, even with the downgrade.”