Vivendi in talks to sell 10 per cent stake in UMG

PARIS: Vivendi is in talks to sell a 10% stake in its prized and lucrative Universal Music Group (UMG) to Chinese tech company Tencent as it seeks to expand its presence in Asia.

UMG is the world’s biggest music label ahead of Sony Music Entertainment and Warner Music, and is home to artists such as Lady Gaga, Taylor Swit, Drake and Kendrick Lamar.

The French media conglomerate said on Tuesday that the deal would give UMG a preliminary equity valuation of 30 billion euros ($33.6 billion) - beter than some had forecast - and that Tencent had an option to buy a further 10% of UMG.

Vivendi shares surged 7% as analysts welcomed the progress made on the sale of a stake in UMG and the valuation.

A deal with Tencent would boost UMG’S presence in the tightly controlled Chinese market and fit well with the Chinese company’s Tencent Music Entertainment unit.

“The valuation looks good, and the progress made on the UMG deal is also positive,” said Gregory Moore, fund manager at Keren Finance, which owns Vivendi shares. Vivendi’s Chief Executive Officer Arnaud de Puyfontaine said last month that proceeds of the sale of up to 50% of UMG would be used for bolt-on acquisitions and “significant” share buybacks.

Controlled by billionaire Vincent Bollore, Vivendi is seeking to cash in on the growing public thirst for subscription and ad-based music streaming services, which have propelled UMG’S profits over the last four years.