February 1, 2021

Tencent consortium now officially owns 20% of Universal Music Group

Tencent consortium now officially owns 20% of Universal Music Group

The consortium led by China’s Tencent Music now officially owns 20% of Universal Music Group (UMG), its parent company Vivendi has confirmed.

The consortium consists of Tencent Music Entertainment and certain global financial investors. It announced in mid-December 2020 it was exercising its call option to take an extra 10%, based on an enterprise value of €30 billion (A$47.6 billion) for 100% of UMG’s share capital.

According to Saturday’s (January 30) statement: “Vivendi has enjoyed the presence of Tencent and its co-investors at UMG’s share capital since March 2020 and is very happy that the consortium decided to take a larger participation.

“This will notably enable UMG to further develop its activities in Asia. Tencent and the consortium members are delighted to support UMG’s growth through this additional investment.

“Together with Vivendi, Tencent and Tencent Music Entertainment will continue to work to broaden artist opportunities and to enrich experiences for music fans, further promoting a thriving music and entertainment industry.”

A separate agreement has enabled Tencent Music Entertainment to acquire a minority stake in the capital of the UMG subsidiary owning its Greater China operations.

The Universal Music Group IPO seems to be on the cards within the next 12 months.

“Following the success of this significant strategic transaction, a UMG listing is planned in early 2022 at the latest. The cash generated by these transactions may be used by Vivendi to reduce its financial debt and to finance acquisitions,” Vivendi said.

More minority shares are expected to be sold before then.

UMG’s entry onto the stock market is expected to give it greater financial muscle to compete with its two major rivals, Warner Music Group and Sony Music Entertainment.

In early 2020, Universal claimed it was #1 in five of the world’s major music markets – the US, Japan, UK, Germany and France.

It was the first time it topped Japan, significantly home of Sony Corp and parent of Sony Music.

For the week of August 21 to August 27, Universal had nine of the Top 10 albums in the US on the Billboard 200. It was only the fourth time that has happened in the chart’s 64-year history and all four times involved Universal.

An analysis by MIDiA found that of the US$18.8 billion (A$24.5 billion) generated by the global recording industry in 2018, Universal’s market share was 30.3%, Sony at 21%, Warner Music at 18.3%, and independents at 27%.

Vivendi’s Q3 2020 results showed that UMG’s revenues, combining recorded music, publishing and merch were up 6.1% to €1.855bn ($2.94 billion).

For Tencent, the increased stake will help it continue to diversify a business that’s heavily focused on gaming and the Chinese market and, with various recent acquisitions, currently has a market value of more than US$11 billion (A$14.3 billion).