Following the announcement, Vivendi made in August 2019 of entering preliminary negotiations with Tencent Holdings Limited (Tencent) for an investment of 10% of the share capital of UMG, it has come to light that Vivendi and Tencent led consortium, have agreed upon the negotiated percentile of the stake at UMG.
This agreement comes with a provision for the purchase of the 10% stake at UMG by Tencent with the participation of TME (Tencent Music Entertainment) and definite global financial investors. It is based on an enterprise value of €30 billion for 100% of UMG’s share capital. Assumably, €3 billion for 10%.
The agreement will be accompanied by a second agreement. It allows Tencent Music Entertainment to acquire a minority share capital of UMG’s subsidiary that will operate in Greater China.
Impact of the agreement
This deal between Vivendi, controlled by French billionaire Vincent Bollore, and Tencent, a China-based entertainment conglomerate, shall work to broaden the opportunities for artists and to enrich experiences for music fans, further promoting a thriving music and entertainment industry.
Also, UMG’s entrance into the Asian market will enable the record label to tap the market including the Korean music market. Tencent is also heavily invested in games and entertainment where music in games is a strong division.
With a stake at UMG, Tencent might find ease in licensing music for games along with an augmented revenue flow.
The agreement further states that the Consortium has an option of acquiring an additional 10% stake at the same price basis of UMG’s share capital until January 15, 2021.
This transaction is set to meet deadlines by the first half of 2020, with competent regulatory authorities.