CHINA (CelebrityAccess) – It looks like Chinese media giant Tencent Holdings Limited is in discussions to buy 10% of Universal Music Group.
According to UMG’s parent company Vivendi, who confirmed the news today (August 6), Tencent has made an offer which puts a preliminary equity valuation of €30bn ($34bn) on UMG on a fully-diluted basis. Tencent’s potential 10% stake would, therefore, cost €3 billion ($3.36bn). The deal would give Tencent a one-year option to purchase another 10% stake on the same terms.
Vivendi has said that the two companies are also exploring other areas of “strategic commercial cooperation” that could help grow UMG, the world’s biggest music company, through new digital initiatives and territories. In addition to these discussions, Vivendi also plans to continue the process for the sale of an additional minority stake in UMG to other potential partners.
The transaction is subject to due diligence on UMG’s part and the finalization of legal documentation.
In a statement, Vivendi said: “Together with Tencent, Vivendi hopes to improve the promotion of UMG’s artists, with whom UMG has created the greatest catalogue of recordings and songs ever, as well as identify and promote new talents in new markets. Vivendi hopes that this new strategic partnership could create value for both Tencent and UMG.”
In its latest quarterly financial results, Vivendi reported that its revenues were up nearly 20% to $3.7bn during the first six months of 2019, while Universal Music Group’s recorded music revenues hit a record $2.93bn in the first half of 2019, up 22.4% (or 16.9% at constant currency).
Tencent, which is known primarily for its gaming and social network business (it owns China’s powerful WeChat platform, which has 900 million daily users), also has its own music unit, Tencent Music Entertainment Group, which was valued at $21.3bn last year. In 2017, UMG and Tencent Music struck a multi-year agreement making the latter a distributor of UMG music in China on its QQ Music, KuGou and Kuwo streaming platforms. Tencent Music also has exclusive rights to sub-license UMG’s content in China.