Takeovers & Buyouts: Tencent-led Consortium Buys 10% of Vivendi-owned Universal Music

January 2, 2020 | Takeovers and Buyouts

Vivendi cashes in on the recovery in the music industry with a stake sale.

Universal Music Group (UMG), the biggest music company in the world, has sold a 10% slice worth $ 3.3 billion to a consortium led by Chinese tech and entertainment behemoth Tencent. By January 2021, Tencent can buy 10% more. Tencent will also get to buy a minority stake in UMG China, according to Reuters.

Sovereign wealth funds pile into the UMG Tencent deal

UMG boasts of music stars Lady Gaga (pictured above), the Beatles, and Taylor Swift. The stake sale values Universal at $ 34 billion. No details are available yet on other members of the Tencent-led consortium, described only as “certain global financial investors.” However, according to Reuters, which quoted a source familiar with the deal, Singapore sovereign wealth fund GIC and the Qatar Investment Authority were involved in the deal.

UMG-Tencent: Vivendi’s strategy

According to Rolling Stone, Vivendi is not done yet with stake sales in UMG, and that transactions with other parties are under consideration.

Vivendi had announced in August 2019 that it had entered into “preliminary negotiations with Tencent Holdings Limited for a strategic investment totaling 10% of the share capital of Universal Music Group (UMG) at a preliminary equity valuation of €30 billion for 100% of UMG on a fully-diluted basis.”

In 2018, the global music business achieved a long-awaited turnaround of sorts. Revenue growth ticked higher than it had ever been in the two previous decades. In 2019, according to the IFPI Federation, music revenues rose 9.7% over 2018.

“With the exception of additional resources to further advance our strategy, everything else will remain the same: our strategic vision; our company, label and business unit names; our locations; and of course, our outstanding people,” said UMG chief Sir Lucian Grainge in a memo to employees.

Deal advantages

The deal allows UMG to access the lucrative Asian market, with K-Pop, or pop music from Korean pop stars becoming highly popular. Meanwhile, Tencent could get a foothold into the US music scene and enter tie-ups with US artists.

Related Story:  With Tencent Backing It, a Virtual Blockchain Bank May Launch Sooner Than You Think

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