China's Tencent, KKR join to bid for 50% of Universal Music: report
04 March 2019
China’s Tencent Music Entertainment Group is reported to have joined hands with US buyout fund KKR to bid for up to 50 per cent of Vivendi’s iconic music division, Universal Music, in a deal that is estimated to be worth up to 20 billion euros ($23 billion), says a Reuters report.
Vivendi, which owns Universal Music, is already in preliminary talks with potential bidders.
French tycoon Vincent Bollore, who has a 25 per cent stake in Vivendi, is in the process of selecting banks to oversee a partial sale of Universal Music Group (UMG), a Reuters report citing sources said.
UMG is the world’s biggest music label ahead of Sony Music Entertainment and Warner Music, and is home to artists like Lady Gaga, Taylor Swift, Drake and Kendrick Lamar.
Vivendi shares were the top gainers on France’s benchmark CAC index on Thursday, up 3.4 percent at 1019 GMT, after Reuters first reported KKR and Tencent’s interest.
Some analysts have said UMG must have global content that is worth 44 billion euros while some other estimates put it between $25 million and $35 million.
Vivendi’s boss Arnaud de Puyfontaine had, in 2017, estimated UMG’s worth to be worth more than $40 billion.
Universal is expected to generate roughly 1.5 billion euros of free cash flow excluding interest payments in 2023.
Tencent Music Entertainment Group, a subsidiary of China’s biggest gaming and social media firm Tencent Holdings Ltd, has an existing licensing agreement with Universal and wants to strengthen its collaboration with a partial acquisition, the sources said, cautioning there is no deal as yet.
Joint venture deal with Bollore would be possibleonly when they have a t be able to secure a majority stake and have a meaningful say on UMG’s strategy going forward, the sources said.
KKR had, in 2013, entered signed a joint venture deal with Bertelsmann, Europe’s largest media company, to back BMG. It proved to be a lucrative investment for KKR, which doubled its money when it sold its stake back to Bertelsmann.
For private equity investors the deal offers a high-profile platform to tap into the music industry, which is recovering from a 15-year long downturn and has grown for the past three years.
Global recorded music revenues rose 8.1 percent in 2017 to $17.3 billion, according to record industry trade group IFPI.