Tencent to buy Warner Music Group stake for $200m?

“Don’t count out Tencent, which already owns stakes elsewhere in music…”

A quote from a Rolling Stone article, published in January, touting Tencent Holdings Ltd as a prime potential buyer of a minority stake in Warner Music Group. The article was called, ‘Where The Music Business Is Going In 2020′.

According to a new story in the Wall Street Journal published today (May 29), Tencent is now indeed in talks to buy a minority stake in WMG, worth $200m.

“Hang on a second,” you might understandably say. “Isn’t Warner heading for an IPO?”

Yes, it is, and apparently that flotation is going to take place next week. Tencent, reports the WSJ, is getting in there early, as one of a number of institutional parties kicking the tires of WMG before it goes public as a potential “anchor” investor.

Warner’s hope is reportedly that these “anchor” investors will help it raise over $1bn in guaranteed share sales ahead of its flotation.

A 13.7% stake in WMG is being made available, in the first instance, on the Nasdaq, according to the music firm’s latest S1/A filing with the SEC.

That stake is made up of 70 million common shares, with Warner aiming for a day-one listing of between $23 and $26 per share.

If the company can float on the Nasdaq within this day-one range, it would give WMG a valuation (not factoring in the company’s ≈$3bn in debt) of between $11.75bn and $13.28bn.

The sale of a 13.7% stake would therefore raise between $1.61bn and $1.82bn for WMG owner Access Industries.

In March, as leader of a consortium of buyers, Tencent completed the acquisition of 10% in Universal Music Group for a purchase price of $3.4bn.Music Business Worldwide

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