China's Tencent and various investors acquire 10% of Universal Music Group

By Emmanuel Legrand

A consortium of investors – led by Tencent Holdings, parent company to Tencent Music Entertainment Group (TME), operator of China's leading music streaming services – will acquire a 10% share in Universal Music Goup from parent company Vivendi, at a company valuation of €30 billion ($34 billion).

  The agreement also offers the consortium to purchase an additional 10% equity stake in UMG at the same enterprise value before Jan. 15, 2021. In addition, Tencent Music Entertainment will buy a minority stake in UMG's greater China subsidiary.  

  Details about the participants in the consortium have not been disclosed. Reuters reported that Singapore's state investment firm GIC and Qatar Investment Authority (QIA) were involved in the project.

Validating UMG's strategy

  TME will invest up to a 10% equity interest in the Consortium. “TME is thrilled to join the consortium in investing in UMG, and intends to further deepen the cooperation with UMG and drive the development of music entertainment market in China,” said the company. Tencent operates China's popular music apps QQ Music, Kugou Music, Kuwo Music and WeSing.

  Universal Music Group chairman and CEO Lucian Grainge commented in a memo to staff: “With the exception of additional resources to further advance our strategy, everything else will remain the same: our strategic vision; our company, label and business unit names; our locations; and of course, our outstanding people. This is an exciting development reflecting a strong validation of our business strategy, our incredible team and your excellent work. It also reflects our shared optimism about UMG’s continued role as the driving force in our industry and how focused we are on the future.”

A risky transaction for consumers

  The transaction is subject to regulatory approvals, and is expected to close by the first half of 2020. European independent music company's trade body IMPALA announced last November that it would challenge the transaction on the grounds that “the risk of harm for consumers and competitors from such a transaction would be a concern because of the impact in both the digital market and the music sector, with independents being squeezed further and artists also losing out,” according to IMPALA’s executive chair Helen Smith.
 
  "If I were an artist on the label I’d be watching this deal closely. Although things probably won’t change if it goes down, it could be a periscope into what might happen in the future, and that could make many artists uncomfortable," wrote Bobby Owsinski of Music 3.0, in a blogpost titled 'New Universal Music Investors May Not Be What Artists Want'.