Record label

ALEX BRUMMER: The record company changes pace for Universal and EMI


Record label changes tone: Universal and EMI’s remnants freed from captivity, says ALEX BRUMMER










One of the most shameful episodes of private equity was the purchase of over £ 3 billion from iconic UK music producer and distributor EMI by Guy Hands’ Terra Firma in 2007.

His reasons for the case were reasonable enough. Hands saw a great British asset, the owner of music ranging from Elgar’s Land of Hope and Glory to the Rolling Stones, wither under the onslaught of piracy and digital music and without a clear strategic direction.

The timing was terrible. On the eve of the great financial crisis, and with the debt hanging around EMI’s neck, it became too heavy for Terra Firma to manage. After a bitter legal dispute, EMI fell into the hands of Citigroup.

Rock royalty: EMI, which was once home to the Rolling Stones (pictured), was sold to Guy Hands’ private equity firm Terra Firma in 2007

Universal Music, run by British music entrepreneur Sir Lucian Grainge, convinced owner Vivendi that this was the opportunity of a lifetime and it turned out.

After a decade in the hands of Universal, it has cleaned up well and all the shebang is returning to the public markets with a valuation of £ 28 billion.

Unfortunately, the initial public offering will take place in Amsterdam and not London, so EMI doesn’t exactly come home.

But the complexity of his ownership, with French tycoon Vincent Bolloré at the helm, almost certainly played a role in the Dutch launch.

Before the float, Vivendi was responsible for selling strategic stakes in Universal. A group led by Chinese tech investor Tencent snatched 20%. And controversial American billionaire Bill Ackman has acquired 10 percent.

All of this makes for an eclectic share register. As for Bolloré himself, he will still control around £ 5.1bn of shares at Universal. Grainge is also online for a huge paycheck.

Putting aside the financial shenanigans surrounding all of this, the positive result is that Universal and the remnants of NMS have been released from captivity.

In the meantime, the challenges of hacking and illegal downloads have resolved themselves and licensed streaming is a huge source of money.

Indeed, a whole new and distinct industry has grown around songbook ownership, with Hipgnosis in the UK among the major players.

Universal, with its array of stars including Taylor Swift and Justin Bieber, has the clout to ensure good distribution and ensure that the royalties end up in good hands.

They are counting on you Sir Lucian.

Expressway

The rise of the sneaker is one of the cultural trends of our time. As a shoe manager told me recently, even in the most formal contexts, the black sneaker replaces the brogue.

JD Sports, where the Rubin Pentland family vehicle dominates the share register with a 55% stake, is a huge beneficiary of this trend.

The company’s latest forecast of doubling profits to £ 750million in the fiscal year ended Jan. 29 sent shares soaring. At nearly £ 12 billion, it is now the most valuable stand-alone retailer in the FTSE 100.

Remarkably for a UK retailer, it is doing well in the United States, in a market that has been a bed of nails for UK retail in the past.

The success must be attributed to the gruff management style of Executive Chairman Peter Cowgill. At a time when UK businesses are under enormous pressure to improve their governance, JD Sports pays little heed to it.

It was the boss of the compensation committee, Andrew Leslie, who was punished for Cowgill’s £ 4.3million bonus, rather than the boss himself.

JD Sports is considered by landlords to be one of the least cooperative companies when it comes to settling unpaid rents during the pandemic.

Despite its financial strength, it still refuses to reimburse the taxpayer for the professional fees suspended during the pandemic.

Cowgill’s disregard for convention does not seem to bother investors. As long as incomes accelerate and profits accelerate, bad governance is examined.

Blue boat

Ken Costa is one of the wisest and most moral voices in British finance.

His claim in the Financial Times that smart chip maker Arm should remain in UK hands because of its value to the UK tech ecosystem and national security must be heard.

On the table right now is a £ 30bn offer from US chipmaker Nvidia, which would undermine Arm’s role as a neutral supplier.

The deal is being reviewed by competition authorities around the world.

Refloating Arm in London would strengthen its independence and improve the City’s reputation for brilliant technological support.

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