MILAN, Jan. 6 (Class Editori) -- The Chinese digital giant Tencent acquired 10 percent of Universal Music Group on the last day of 2019, offered for sale by Vivendi, the French multimedia group that had long since decided to sell up to 50 percent of the stake. The entire company was valued at 30 billion euros, so the Tencent operation is worth around 3 billion.
Tencent is the leader, through Tencent Music Entertainment, of a consortium that also groups international investors, among which, according to Reuters, there is also the sovereign wealth fund of Qatar. For the Chinese, however, this is an important move: active in video games, in cloud services for businesses, in messaging where it reaches over 900 million users per day with WeChat, and in mobile payments, Tencent will be able to further diversify its business.
Music for the Chinese giant could be the key to increasing consumer revenues in the mother country which is expected to become the largest market in the world for the sector despite the fact that subscriptions to streaming services today generate very few results. Among other things, Tencent is also a partner of Spotify with a 7.5% (due to an equity exchange) and as early as 2017 it has entered into a series of agreements with record majors to bring its catalogs to China.
The deal will be subject to regulatory approval but it is only a first step. By January 15, 2021, in fact, Tencent could acquire an additional 10% stake in Universal, doubling its presence and that of the other associated investors. Immediately, however, a second agreement will follow with the group will enter with a minority stake in the Chinese subsidiary of Umg.
Already in August Vivendi announced that it entered into confidential negotiations with Tencent. Before that, in July 2018, the group controlled by Vincent Bollorè stated that he had appointed nine banks to find possible investors to sell up to half of the shares of Universal Music. The lack of concrete agreements, however, made it clear how far the requests were from the offers of the suitors.
Already the 30 billion euros of valuation of Tencent, however, are very high, representing 30 times the gross operating margin and 3/4 times the value recognized to the group when Bollorè joined in 2014. Based on this result, the French group is now determined to sell further minority shares of Umg.
The advantages of the operation are obviously mutual. In a joint statement the two groups stated that: "Vivendi is very happy with the arrival of Tencent and its co-investors. They will allow Umg to develop further in the Asian market", while "Tencent and the consortium members are excited to support Umg's growth through this investment. Together with Vivendi, Tencent and Tme will work to expand the opportunities for artists and to enrich the experiences of music fans, further promoting a thriving sector of music and entertainment".
Vivendi with this and future sales, will be able to reduce its debt that has risen in recent years due to the considerable investments in various fields, of which those in Italy (Mediaset, Tim) are only a part.
(Source:Class Editori)
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