Vivendi SA, the owner of Universal Music Group, won an auction to buy Bertelsmann AG’s BMG music-publishing division for 1.63 billion euros ($2.1 billion) to add songs by Justin Timberlake, Nelly and Linkin Park.

Vivendi’s biggest transaction in more than two years allows Santa Monica, California-based Universal to leapfrog EMI Group Plc by increasing royalties. The purchase of the BMG catalog will generate income from music played at concerts and used in advertising, and from lyrics on t-shirts and coffee mugs.

Universal has about 25% of the $33 billion global music market and artists including Elton John and U2. Sony BMG, a joint venture of Sony Corp. and Bertelsmann, EMI and Warner Music Group Corp. all trail Universal in the industry, which suffered after illegal downloading and piracy eroded sales of compact discs.

“The deal is not a bargain but it makes a lot of sense strategically,” said Markus Steinbeis, who helps manage about 2 billion euros in assets including shares of Paris-based Vivendi at Activest Investment. “It should improve Vivendi’s profit margins and round off the company’s business model.”

Shares of Vivendi dropped 0.4% to 27.05 euros in Paris today.The stock has risen 1.7% this year, compared with a 10.6% gain for the 29-member Bloomberg Europe Media Index.

The acquisition of BMG Music Publishing will help Vivendi bolster its music business “at a time when the music market is improving, supported by technological innovations and digital sales,” Vivendi Chief Executive Officer Jean-Bernard Levy said in an e-mailed statement today.

Vivendi beat competing bidders including Warner Music Group, EMI and Viacom Inc., according to the Wall Street Journal.

“The price is at the high end of the range expected by the market,” said Clemence Bounaix, an analyst at Richelieu Finance, which manages about $5 billion in assets including Vivendi shares. “Nevertheless, it’s a reasonable price, taking into account the strategic value of BMG for Vivendi.”