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Capital Calls: French music IPO hits a minor key

2 minute read

Musical notes are seen in this illustration photo April 4, 2018.

LONDON, May 10 (Reuters Breakingviews) - Concise insights on global finance.

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WHEN YOU BELIEVE. France may soon have a mini-Vivendi (VIV.PA). Music group Believe is looking to raise about 500 million euros in a Paris stock market listing to go on an acquisition spree. The company, led by ex-Vivendi executive Denis Ladegaillerie, helps more than 850,000 music artists distribute their content on platforms like Spotify, Apple Music and YouTube, and is targeting a valuation of about 2.5 billion euros.

That hoped-for price looks like a bargain. With sales growing more than 20% a year, Believe reckons its revenue can reach 654 million euros by 2022. That implies an enterprise value to revenue multiple of 3.1 times, assuming a 2 billion euro valuation including cash after the IPO. Bigger rivals Warner Music (WMG.O) and Tencent Music Entertainment (TME.N) are trading at an average of 3.9 times 2022 sales, according to Refinitiv data. And Ladegaillerie may be able to boost sales by snapping up music catalogues, or smaller local rivals like TuneCore. The risk is that he spends the money badly. If so, Believe might end up becoming an acquisition target itself. (By Karen Kwok)

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