Deal with Tencent could open up new markets for music label, Vivendi still exploring other strategic partnerships

Vivendi is in talks that could see Chinese conglomerate Tencent acquire a 10% stake in Universal Music Group for €3 billion.

The French media and telecoms company said it is holding preliminary talks with Tencent about a strategic investment in Universal Music. The music group has a preliminary equity value of €30 billion, Vivendi said, making a 10% stake worth a tenth of that sum.

Tencent would also secure a one-year call option to buy a further 10% of Universal Music at the same price, it said.

The two companies are also exploring opportunities for strategic commercial cooperation, which in Universal Music’s case could mean access to new markets, Vivendi said. The firm said it hopes to work with Tencent to better promote Universal Music’s artists as well as identifying new talents in new markets.

Universal Music accounted for 44% of Vivendi’s revenues in the six months to the end of June, bringing in €3.2 billion, and generated well over half of earnings with EBITDA of €481 million.

Vivendi announced plans to sell off up to 50% of Universal Music’s share capital over a year ago as part of a bid to extract value from the asset. At its second-quarter results announcement last month, it confirmed it had selected advisory banks as part of the process and reiterated that it could sell stakes in the business to one or more partners.

"Several contacts have already been established with potential strategic partners," it said.

On Tuesday it added that in addition to its discussions with Tencent, "Vivendi also plans to continue the process for the sale of an additional minority stake in UMG to other potential partners."