Tencent set to buy 10% stake in Universal Music

image source, Reuters
image captionTaylor Swift is one of the artists on Universal's music label

Vivendi is set to sell a 10% stake in the Universal Music Group (UMG) to Chinese tech group Tencent.

Universal - the world's biggest music company - already has its content streamed by Tencent in China as the result of a deal struck in 2017.

Lady Gaga, Taylor Swift, Drake and Kendrick Lamar are among the artists on the Universal label.

In a statement, Vivendi said that, with Tencent, it "hopes to improve the promotion of UMG's artists".

It added that it also aims to "identify and promote new talents in new markets".

The deal would give UMG a preliminary equity valuation of €30bn (£27.6bn; $33.6bn), said Vivendi, which is the group's parent company. Tencent would also have an option to buy a further 10% of UMG within a year.

Vivendi is controlled by billionaire Vincent Bolloré.

In a note to UMG staff, chairman Sir Lucian Grainge called the proposed deal "an exciting development" and confirmed the group would remain "part of the Vivendi family".

He added: "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."

Just over a year ago, Vivendi first recommended a sale of up to 50% of UMG and said it hoped to complete a deal by the start of 2020.

Investment banks have estimated the business to be worth anything between €17bn and €44bn.

Vivendi is hoping to cash in on the popularity of subscription and ad-based music streaming services, which have helped to boost UMG's profits over the last four years.

In April 2017, UMG announced a long-term deal with streaming service Spotify. This allows Universal artists to offer new albums on Spotify's paid-for premium service before appearing on its free version.

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