Universal Music Sells 10% of Tencent-Led Consortium - Variety

As expected, Universal Music Group sold a 10% stake in a consortium led by the Chinese company Tencent as part of a deal that estimates UMG, the largest music company in the world where Taylor Swift, Drake and many others reside, for 30 billion euros (about 33, $ 6). billion).

Parent company UMG Vivendi also agreed that the consortium could buy back another stake up to 10% at the same price by January 15, 2021. Vivendi said Tencent’s music division will also buy a minority stake in Universal Music in China.

The company’s joint statement said: “Vivendi is very pleased with the arrival of Tencent and its co-investors. They will allow UMG to further develop in the Asian market. “Tencent and the members of the Consortium are pleased to support the growth of UMG through these investments. Together with Vivendi, Tencent and TME will work to expand the possibilities for artists and to enrich the experience for music lovers, contributing to the further development of a thriving music and entertainment industry. ”

In a note to his staff, UMG Chairman and CEO Lucian Grange assured his colleagues that everything would remain commonplace. “With the exception of additional resources to further advance our strategy, everything else will remain the same: our strategic vision; names of our company, trademark and division; our locations; and, of course, our outstanding people, ”he wrote.

“This is an exciting development, reflecting a strong test of our business strategy, our incredible team and your excellent work. It also reflects our general optimism about the continued role of UMG as a driving force in our industry and how focused we are on the future.

In the last quarterly financial results, UMG revenue grew by 17.5% to 5.06 billion euros (5.63 billion dollars) compared with the first nine months of 2018. Recorded income from music grew by 15.6%, which was facilitated by an increase in revenue from subscription and streaming (an increase of 23.4%) and high physical sales (an increase of 14.9%). Since the beginning of the year, his best sellers are new releases from Billie Eilish, Ariana Grande, Taylor Swift, Post Malone and the Japanese band King & Prince, as well as continued sales of the soundtrack from A Star Is Born and several Queen albums.

Tencent is best known for its business in the field of games and social networks – it owns a powerful Chinese platform WeChat, which daily serves 900 million users. But the company also has its own music division, Tencent Music Entertainment Group, which at the end of last year raised more than $ 1 billion in IPOs, which overall estimated the division to be $ 21.3 billion. Tencent also owns a 7.5% stake in the streaming giant Spotify, as a result of a stock exchange in December 2017, making it one of the largest shareholders in the Swedish company.

Vivendi and Tencent are already familiar interlocutors. In 2017, UMG and Tencent Music entered into a multi-year agreement, making the latter a UMG music distributor in China on its QQ Music, KuGou and Kuwo streaming platforms. Tencent Music also has exclusive sub-licensing rights for UMG content in the Middle Kingdom.

It has long been rumored that Tencent will become one of the bidders for a stake in UMG after a year ago Vivendi announced its intention to sell up to 50% of the company. The French media giant ruled out the possibility of an IPO.

Progress in potential sales was slow, as some analysts increased their UMG valuation to $ 50 billion. UMG also suffered from disagreements over the 2008 fire, which is estimated to have destroyed 500,000 master records in the company’s huge archive.

An insider with knowledge of the sales process told Variety that the deal with Tencent would be strategic because China is ready to become the world’s largest music market. At the same time, however, the potential deal should also stimulate the participation of other investors to prevent the Chinese company from gaining too much control over UMG, he said.

In June, Yannick Bollor, chairman of Vivendi’s supervisory board, said the company was “in no hurry” and “very confident” that it would find a suitable partner to buy up to 50% of UMG. He cited the “huge growth” of the music industry as the pace that Vivendi wants to maintain in the coming years.