Tencent enters talks to buy 10% of Universal Music Group

French conglomerate Vivendi has revealed that it is in preliminary talks with China’s Tencent Holdings Ltd. to buy 10% of Universal Music Group.

The deal would value the world’s biggest record company at €30 billion (A$49.4 billion).

A statement from Vivendi added that Tencent has a one-year call option to double that stake at the same price.

It added: “Vivendi and Tencent are also concurrently considering areas of strategic commercial cooperation.

“In this context, Vivendi is keen to explore enhanced cooperation which could help UMG capture growth opportunities offered by the digitalization and the opening of new markets.

“Together with Tencent, Vivendi hopes to improve the promotion of UMG’s artists, with whom UMG has created the greatest catalogue of recordings and songs ever, as well as identify and promote new talents in new markets.

“Vivendi hopes that this new strategic partnership could create value for both Tencent and UMG.”

At the same time, Vivendi is also in the process of selling more minority stakes to other potential parties.

Vivendi is trying to offload 50% of Universal Music, with analysts putting the music company’s worth at between $29.4 billion and $73.6 billion.

The sale was slowed down by some private equity investors baulking at the high price, and Vivendi’s further demand that it not relinquish any creative control.

UMG chairman and CEO Sir Lucian Grainge responded to the Vivendi announcement with a note to his staff:

“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 centre of everything we do and providing them with the industry’s best creative and commercial resources on a global basis.”