Tencent In Talks To Acquire Up To 20% Of UMG

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Chinese internet giant Tencent is in talks to acquire a stake in Univeral Music Group, both companies have confirmed. Earlier this year, UMG parent Vivendi announced plans to sell as much as 50% of the world's biggest music group.

Under the proposed deal, Tencent would first acquire a 10% stake in UMG with a one year option to purchase another 10% under the same terms. Negotiations are being based on a valuation of UMG of $33.6 billion, making the cost of Tencent’s 10% about $3.36 billion.

Tencent is best known for its successes in gaming and social networking including China’s hugely popular WeChat, which has 900 million active daily users. It's Tencent Music Entertainment Group raised $1 billion in an IPO late last year at a valuation of more than $21 billion. Thanks to a stock swap, Tencent also owns 7.5% of Spotify, making it one of the streamer's top shareholders. 

“This is an exciting development for both Vivendi and UMG and affirms once again just how much our strategy and hard work are succeeding,” UMG CEO and Chairman Lucian Grainge wrote in a letter to staff on Tuesday. “As Vivendi discussed last week with its investors, we continue to deliver remarkable, record-setting results. Our success is driven by placing our recording artists and songwriters at the center of everything we do and providing them with the industry’s best creative and commercial resources on a global basis."

Full Text Of Lucian Grainge's Letter to UMG Staff On Tencent Music Talks

Dear Colleagues,

Today Vivendi announced that they have entered into preliminary negotiations with Tencent for an investment of 10% of UMG’s share capital.

This is an exciting development for both Vivendi and UMG and affirms once again just how much our strategy and hard work are succeeding. As Vivendi discussed last week with its investors, we continue to deliver remarkable, record-setting results. Our success is driven by placing our recording artists and songwriters at the center of everything we do and providing them with the industry’s best creative and commercial resources on a global basis.

Obviously, we remain part of the Vivendi family—today’s announcement is about a minority investment by Tencent. I can assure you that Vivendi’s Supervisory and Management Boards as well as the Bolloré family continue to be steadfast supporters of our strategy, our work and our teams. And it goes without saying, that our commitment to recording artists and songwriters will continue unchanged.

Clearly, the possibilities to accelerate and broaden our strategy are exciting. But for now, it’s critical that we remain focused on our important work at hand.

Thank you once again for your incredible achievements. As validated by this announcement, our results to date have been historic. As we move forward, we will continue to embrace change and disrupt the traditional business, as we build a bright future for ourselves, our artists and our investors. Lucian

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