SHENZHEN, China — Chinese digital tech giant, Tencent, known for its gaming and social network business — has entered into negotiations with French media conglomerate Vivendi to buy a 10% stake in Universal Music Group.
Vivendi announced the talks Tuesday. Tencent’s potential 10% stake would cost €3 billion ($3.36 billion). The deal would give Tencent a one-year option to purchase another 10% stake on the same terms.
The company also has its own music unit, Tencent Music Entertainment Group, which raised more than $1 billion in an IPO late last year that valued the division overall at $21.3 billion. Tencent also holds a 7.5% equity stake in streaming giant Spotify — making it one of the Swedish company’s biggest shareholders.
In a letter to staff, Lucian Grainge, the CEO and chairman of UMG, hailed the talks with Tencent.
“This is an exciting development for both Vivendi and UMG and affirms once again just how much our strategy and hard work are succeeding,” Grainge wrote. “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 center of everything we do and providing them with the industry’s best creative and commercial resources on a global basis.
“Obviously, we remain part of the Vivendi family – today’s announcement is about a minority investment by Tencent. I can assure you that Vivendi’s Supervisory and Management Boards as well as the Bolloré family continue to be steadfast supporters of our strategy, our work and our teams. And it goes without saying, that our commitment to recording artists and songwriters will continue unchanged.”
Tencent had long been rumored to be one of the suitors for a stake in UMG after Vivendi announced a year ago its intention to sell up to 50% of the company. The French media giant ruled out an IPO as an option.