Tencent in talks to buy 10% of UMG

LONDON: Vivendi SA is in talks to sell 10% of Universal Music Group to China’s Tencent Holdings Ltd, helping the world’s biggest music company expand in fast-growing Asian markets.

The discussions reinvigorate the French media company’s flagging efforts to find new partners for its most successful business.

Vivendi said yesterday that the talks valued Universal Music at €30 billion ($33.6 billion), and Tencent could decide to double its stake on the same terms within a year.

A surge in subscription music streaming has revived the fortunes of big music labels in Western markets, and Universal Music is now looking for further growth.

Streaming has helped music sales grow at the fastest pace since the 1990s, and Universal Music now contributes around 44% of Vivendi’s revenue, leading analysts to value the business at approximately €33 billion.

Universal Music’s sales rose by around 19% in the first half, helped by releases from artists including the 17-year-old singer Billie Eilish and the Japanese band King & Prince.

Tencent is also big in streaming. Last year it floated its Tencent Music Entertainment Group, whose growth in China mirrors that of Spotify Technology SA in the US and Europe.

Tencent already works with Universal Music on distribution and marketing in China under a co-operation deal sealed in 2017.

“Having a toe-hold in Universal would allow Tencent to ensure Universal’s content is always available to TME and even to Spotify, in which Tencent owns a stake,” said Sumeet Singh, an analyst with Singapore-based Aequitas Research.

Universal Music’s growth has helped offset a weaker performance at Vivendi’s other businesses.

The company’s market value at Monday’s close was €29.2 billion, less than the music unit’s equity value of €30 billion. Other Vivendi units include Havas SA, an advertising group, and the broadcaster Canal+.