Tencent could further increase Universal music stake

Business | 14 Oct 2020 4:44 pm

Tencent Holdings (0700) is planning to increase its stake in Universal Music Group by a further 10 percent before the option expires in January, according to people familiar with the matter.

The Chinese technology company last year led a consortium that purchased 10 percent of the world’s biggest music company from French media company Vivendi SA. That deal valued Universal Music at 30 billion euros and Tencent and its partners have the option to increase their stake to 20 percent at the same valuation until Janaury 15, 2021.

Tencent is likely to exercise this option, three people said, asking not to be identified as the deliberations are private. It could make the move before year-end, one person said.

Shares of Vivendi gained by 2.2 percent in early trading in Paris. Shares of Tencent in Hong Kong added 2.2 percent in early trading today, reaching a record of HK$569.5 each. Tencent’s American Depositary Receipts achieved a record closing price of US$74.04 in Tuesday’s U.S. session, after Apple Inc. announced its game League of Legends: Wild Rift would be coming to iPhone 12.

It is not clear whether Tencent will be joined by the original consortium members, the identities of which haven’t been made public, the people said. Hillhouse Capital and Singapore sovereign wealth fund GIC Pte were among potential investors that Tencent approached, Bloomberg News reported last year.

Deliberations are ongoing, and Tencent could still opt not to increase its stake in Universal Music, one of the people said. Representatives for Tencent and Vivendi declined to comment.

By increasing its stake, Tencent would seek to diversify from gaming and China, where it has been busy with deals this year. It’s helped orchestrate the combination of Huya Inc. and DouYu International Holdings, creating a Chinese game-streaming giant with a market value of more than US$11 billion. It has also proposed to take private Chinese gaming firm Leyou Technologies Holdings.

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