Chinese media giant Tencent Holdings Limited is in discussions to buy 10% of Universal Music Group, UMG’s parent Vivendi has confirmed today (August 6).
Tencent has made an offer which puts a preliminary equity valuation of €30bn ($34bn) on UMG on a fully-diluted basis.
Its offer for 10% is therefore worth €3bn. The €30bn valuation is worth a 33X multiple on UMG’s EBITA (earnings before interest, taxes, and amortization) figure for 2018 (€902m).
If the deal is finalized, Tencent would also have a one-year call option to acquire an additional 10% of UMG at the same price and terms.
In a statement, Vivendi 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.”
The transaction is subject to due diligence on UMG and finalization of legal documentation. In addition to these discussions, Vivendi also plans to continue the process for the sale of an additional minority stake in UMG to other potential partners.
Vivendi last month announced that it had appointed investment banks to assist with the sale of up to 50% of UMG to one or more strategic partners.
Universal Music Group’s recorded music revenues hit a record €2.596bn ($2.93bn) in the first half of 2019, up 22.4% (or 16.9% at constant currency).
Overall half-year revenues at UMG’s wider company – including recorded music, plus publishing, merchandise and more – reached €3.26bn ($3.68bn). That was another all-time record, up 24.0% year-on-year, and 18.6% at constant currency.Music Business Worldwide