Universal Music Group owner in talks to sell 10% stake to Tencent
Vivendi, owner of Universal Music Group (UMG), is in talks with Chinese tech company Tencent, to sell a 10% stake in its prized and lucrative UMG, as it seeks to expand its presence in Asia.
UMG is the world’s biggest music label ahead of Sony Music Entertainment and Warner Music, and is home to artists such as Lady Gaga, Taylor Swift, Drake, Tiwa Savage and Kendrick Lamar.
The French media conglomerate said on Tuesday that the deal would give UMG a preliminary equity valuation of 30 billion euros ($33.6 billion) – better than some had forecast – and that Tencent had an option to buy a further 10% of UMG.
Vivendi shares surged 7% as analysts welcomed the progress made on the sale of a stake in UMG and the valuation.
A deal with Tencent would boost UMG’s presence in the tightly controlled Chinese market and fit well with the Chinese company’s Tencent Music Entertainment unit.
“The valuation looks good, and the progress made on the UMG deal is also positive,” said Gregory Moore, fund manager at Keren Finance, which owns Vivendi shares.
Vivendi’s Chief Executive Officer Arnaud de Puyfontaine said last month that proceeds of the sale of up to 50% of UMG would be used for bolt-on acquisitions and “significant” share buybacks.
Controlled by billionaire Vincent Bollore, Vivendi is seeking to cash in on the growing public thirst for subscription and ad-based music streaming services, which have propelled UMG’s profits over the last four years.
“Together with Tencent, Vivendi hopes to improve the promotion of UMG’s artists, with whom UMG has created the greatest catalog of recordings and songs ever, as well as identify and promote new talents in new markets,” Vivendi said in a statement.
Vivendi first told markets it would sell part of UMG a year ago but had made little progress until announcing last month that it had selected investment banks to start a formal sale process of a minority stake, which should be finalised by the start of next year.
Investment banks have estimated the business is worth anything between 17 billion to 44 billion euros.
Vivendi also said on Tuesday that it was continuing the process to sell further minority stakes in UMG to other partners.