Tencent Officially Concludes 10% Purchase of Universal Music Group

Tencent Officially Concludes 10% Purchase of Universal Music Group
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Tencent, the Chinese multinational conglomerate, has announced that it has finalized a 10% purchase of Universal Music Group (UMG) for 3 billion euros ($3.36 billion) from Vivendi. The acquisition is still subject to regulatory approval and other conditions, but it is expected to be finalized during the first half of 2020.

While Tencent has not named the other investors with which it formed the consortium, it referred to them as “global financial investors.” As part of the deal, Vivendi granted the company a one-year call option to buy another 10% of UMG for the same terms. According to Billboard, the two companies are further working on an agreement that would give Tencent a minority interest in UMG’s China subsidiary.

Vivendi has also indicated that it may sell additional minority stakes of UMG to other parties at a similar price as what was agreed upon today. The company has even hired an unnamed investment bank to handle these transactions.

There are good reasons for all the interest in UMG. Its third-quarter revenues were up by more than 15% and reached $1.733 billion. Recorded music alone generated $1.538 billion in the quarter.

All parties involved in the transaction have issued statements regarding it. Tencent wrote that it “and the consortium members are excited to support UMG’s growth through this investment. Together with Vivendi, Tencent and Tencent Music Entertainment will work to broaden the opportunities for artists and to enrich experiences for music fans, further promoting a thriving music and entertainment industry.”

UMG wrote that it was “an exciting development reflecting a strong validation of our business strategy, our incredible team, and your excellent work. It also reflects our shared optimism about UMG’s continued role as the driving force in our industry and how focused we are on the future.”

Finally, Vivendi said that it “is very happy with the arrival of Tencent and its co-investors. They will enable UMG to further develop in the Asian market.”

The deal has been long-awaited, with rumors of Tencent’s interest in UMG first emerging in October 2019. This acquisition is a significant expansion of Tencent’s already vast media and entertainment empire, which includes Tencent Music Entertainment and stakes in companies such as Spotify, PUBG Corporation, and Epic Games.

The global music industry has been undergoing a transformation in recent years, with streaming services such as Spotify and Apple Music becoming the primary means of music consumption. The acquisition of UMG gives Tencent a significant foothold in the industry and allows the company to tap into the growing demand for music streaming services in China and around the world.

This deal also highlights the growing influence of Chinese companies in the global entertainment industry. Tencent has already made significant investments in Hollywood, with stakes in companies such as Warner Music Group, Skydance Media, and Legendary Pictures.

Overall, the acquisition of UMG is a significant move for Tencent, one that will undoubtedly strengthen the company’s position in the global entertainment industry. With the deal still subject to regulatory approval, it remains to be seen how this acquisition will impact the music industry and whether it will lead to further consolidation in the sector.

2 Responses

  1. Tom Hendricks

    The writing is on the wall, pennies for play gets rid of the big 3 and returns content revenue to the hands of the creator. These companies may be dinosaurs, but they see something DMN does not”