French media giant Vivendi said Tuesday it would sell 10 percent of its Universal Music Group subsidiary to a consortium led by the Chinese behemoth Tencent for three billion euros.
The agreement, worth around $3.36 billion, is “based on an enterprise value of 30 billion euros for 100 percent of UMG’s share capital” and is expected to be finalised by mid-2020, a Vivendi statement said.
The consortium comprising Tencent Music Entertainment and “certain global financial investors” holds an option to buy an additional 10 percent of UMG “on the same price basis” by January 15, 2021, the statement added.
Vivendi said the sale would help UMG, one of the world’s three biggest music companies along with Sony Music Entertainment and Warner Music Group, to develop further in Asia.
If the Tencent-led consortium increases its holding to one-fifth of UMG, it could raise the question of relations with artists who have been critical of China in the past.
UMG is home to venerable acts including the Beatles, the Rolling Stones and Andrea Bocelli, to which it has added younger stars such as Rihanna, Justin Bieber and Ariana Grande.
Bieber has been declared persona non grata by the Chinese government owing to “bad behaviour,” while Lada Gaga and the rock group Bon Jovi, who have also signed with UMG, have angered Beijing by voicing support for the Tibetan spiritual leader, the Dalai Lama.
On a business level however, having Tencent as a strategic investor will give UMG access to a huge Chinese-based internet distribution network that includes the WeChat message application along with Tencent’s electronic payment system and mobile telephone-based video games.
Funds will also now be available for Vivendi to invest in digital-based film and entertainment content.
Big Chinese firms are increasingly interested in Western entertainment companies, after establishing a strong presence in Hollywood.
Tencent Music, a popular online music platform, was listed on the New York stock exchange in December 2018 with Vivendi among its shareholders.
Run by the billionaire Pony Ma, Tencent has been spending heavily on content for its various digital platforms, in particular with the production of films and television programmes.
Vivendi said the agreement announced on Tuesday also aimed “to broaden the opportunities for artists and to enrich experiences for music fans, further promoting a thriving music and entertainment industry.”
Another agreement expected in the near future could allow Tencent to acquire “a minority stake” in a UMG unit that groups its Chinese interests.
In July 2018, Vivendi said it was prepared to sell up to 50 percent of the shares in UMG.
In midday exchanges Vivendi shares showed a gain of almost 0.5 percent on the Paris stock exchange, which was essentially unchanged overall.