Tencent may increase stake in Vivendi’s Universal Music Group by another 10%

REUTERS/Arnd Wiegmann

Tencent HoldingsLtd. is planning to increase its stake in Universal Music Group by a further 10% before the option expires in January, according to people familiar with the matter.

The Chinese technology company last year led a consortium that purchased 10% of the world’s biggest music company from French media company Vivendi SA. That deal valued Universal Music at 30 billion euros ($35.2 billion) and Tencent and its partners have the option to increase their stake to as much as 20% at the same valuation until Jan. 15, 2021.

Tencent is likely to exercise this option, three people said, asking not to be identified as the deliberations are private. It could make the move before year-end, one person said.

Shares of Tencent listed in Hong Kong rose as much as 2.2% in early trading Wednesday, reaching a record of HK$569.5 ($74.48) each. Tencent’s American Depositary Receipts achieved a record closing price of $74.04 in Tuesday’s US session, after Apple Inc. announced its game League of Legends: Wild Rift would be coming to iPhone 12.

It isn’t clear whether Tencent will be joined by the original consortium members, the identities of which haven’t been made public, the people said. Hillhouse Capital and Singapore sovereign wealth fund GIC Pte were among potential investors that Tencent approached, Bloomberg News reported last year.

Deliberations are ongoing, and Tencent could still opt not to increase its stake in Universal Music, one of the people said. Representatives for Tencent and Vivendi declined to comment.

By increasing its stake, Tencent would seek to diversify from gaming and China, where it has been busy with deals this year. It’s helped orchestrate the combination of Huya Inc. and DouYu International Holdings Ltd., creating a Chinese game-streaming giant with a market value of more than $11 billion. It has also proposed to take private Chinese gaming firm Leyou Technologies Holdings Ltd.

Universal Music has been boosted by a surge in streaming that has dragged the industry out of a decade-long slump. The music business has helped Vivendi hold up through the pandemic lockdown, limiting the blow from a drop in advertising and publishing revenue.

A deal by Tencent will counter a recent venture by rival NetEase Inc., which in August struck a deal to license songs from Universal Music for the first time. China’s antitrust authorities had investigated Tencent’s dealings with the world’s three biggest record labels but the probe was suspended this year, people familiar with the matter said in February.

An initial public offering of Universal Music is planned by early 2023, according to a Vivendi statement in February. An entry onto the stock market could give the music group more financial clout to compete with rivals Warner Music Group and Sony Music Entertainment. Tencent also plans to take a minority stake in Universal Music’s Chinese subsidiary.

Bloomberg

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.