Tencent Holdings of China (0700.HK) is in talks with Vivendi of France (VIV.PA) to buy up to 20% of Universal Music Group (UMG), a record company, with a valuation of about 30 billion euros ($34 billion), and both companies intend to expand the recovering global music market.
The talks are still in the preliminary stage. The discussions between the two sides highlight Tencent's position as the gatekeeper of China's growing but tightly controlled music market and its interest in expanding its global business. In addition, it also highlights UMG's ambition for new markets and online streaming music.
According to Midea predicts, a British-based media analyst, global music streaming retail sales are expected to more than double to $45.3 billion by 2026 and $19.6 billion by 2018.
Vivendi said Tuesday that Tencent would buy a 10% stake in Universal Music first. Universal Music is the largest music record company in the world.
Tencent also has the option to buy a 10% stake in Universal Music. Tencent now owns shares in the world's hottest music streaming services, including Sweden's Spotify (SPOT.N), India's Gaana, Tencent Music Entertainment Group (TME.N), and the Asian streaming application Joox.
Vivendi shares closed up 4% at 24.93 euros, and analysts welcomed the progress in selling global music shares.
"The valuation looks good and the progress of the global music deal is positive," said Gregory Moore, fund manager of Keren Finance, which owns Vivendi shares. Vivendi said the two groups were also "considering areas of strategic business cooperation", which led analysts to suspect that the scope of the negotiations might be broader.
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