French media conglomerate Vivendi has entered into preliminary negotiations with Tencent Holdings which would see the Chinese giant make a strategic 10% investment in the share capital of Universal Music Group. The negotiations are based on a 100% equity valuation of UMG of 30B euros ($33.6B), its owner Vivendi said today. In addition, Tencent would have a one-year call option to acquire a further 10% at the same price and terms, while the companies are also exploring other areas of cooperation.
UMG is the world’s biggest music group with labels that include Capitol, Def Jam, Interscope, Island, Republic, Universal Music Nashville, Universal Music Latin Entertainment, Verve, Motown and Blue Note. Acts include Lady Gaga, Katy Perry, Madonna, U2 and the Rolling Stones.
China's Tencent Agrees To Buy 10% Of Vivendi's Universal Music Group For $3.4B
About a year ago, Vivendi said it was considering the sale of up to 50% of UMG’s share capital “to one or more strategic partners.” Along with the Tencent talks, Vivendi, which also owns Canal Plus, today said it plans to continue seeking other potential partners for a minority UMG stake.
Gaming, social networks and entertainment behemoth Tencent is already heavily into music. In December last year, its Tencent Music Entertainment Group raised $1.1B in a U.S. IPO. Tencent also owns a stake in Spotify.
In terms of expanded strategic commercial crossover, Vivendi said today that it is “keen to explore enhanced cooperation which could help UMG capture growth opportunities offered by the digitalization and the opening of new markets.” Together with Tencent, Vivendi hopes to improve the promotion of UMG’s artists, as well as identify and promote new talents in new markets.
UMG has been growing its reach into film and television. It recently signed a multi-year first-look TV deal with Lionsgate. Under that pact, Lionsgate and Polygram Entertainment will develop original scripted and unscripted TV projects drawn from UMG’s labels, artists and music.
The transaction with Tencent is subject to due diligence on UMG and finalization of legal documentation, Vivendi said.
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