- Tweeter
republish
The French media giant Vivendi announced that it signed an agreement this Tuesday, December 31, to sell 10% of the capital of its subsidiary Universal Music Group (UMG) to a consortium led by the Chinese internet giant Tencent. Cost of the transaction: 3 billion euros. A success for China when its investments abroad are at the lowest.
The Beatles, the Rolling Stones or Rihanna. By taking a share of the capital of Universal Music, Tencent invites itself to the heart of the world music industry. Universal is one of the three major majors, with Sony and Warner, which dominate this market.
The transaction is titanic because Tencent is one of the “BATX”, the Chinese GAFA, with the search engine Baidu, the colossus of e-commerce Alibaba and the smartphone manufacturer Xiaomi. Tencent is also the owner of WeChat , this social network that crushes the Net in China with its billion users, its vast ecosystem combining a messaging service, a news feed, a social network and a payment service. . Not to mention its massive presence in online video games, movies and entertainment in general.
Strategic choice
Far from being haphazard, the choice is strategic: the Shenzhen-based firm is already linked to Universal by distribution agreements. Especially since Vivendi is one of the shareholders of Tencent Music. Since 2017, the very popular online music platform of the Chinese giant has been authorized to distribute Universal music via streaming.
Tencent's entry into the capital could therefore allow Universal to increase its digital presence and its revenues in a booming Chinese market and more broadly in Asian countries. " Vivendi is delighted with the arrival of Tencent and its co-investors, which will allow greater development on the Asian market, " said on Tuesday the press release from the conglomerate led by Vincent Bolloré .
For its part, in front of Universal shareholder, Tencent intends to gain the upper hand over its Chinese competitors, including ByteDance, its social network, its video and music sharing sites like Toutiao and TikTok.
Tencent could have missed the deal
It was through a consortium that Tencent reached a deal with Universal. The operation, conducted " on the basis of an enterprise value of 30 billion euros for 100% of the capital of UMG " should be finalized by mid-2020 subject to a regulatory green light, specifies Vivendi.
But the 10% sold does not sign the end of the deal. Tencent could subsequently own 20% of Universal, or even more. Indeed, the same consortium formed by the Chinese giant with " certain international financial investors " not named, now has a one-year purchase option until January 15, 2021 to acquire an additional 10% stake in the " Major of the disc " on the same price basis.
Vivendi had announced in July 2018 its intention to sell up to 50% of the capital of Universal. The French group then said that it was looking for " one or more strategic partners ". It was last August that negotiations with Tencent began. But the Chinese firm had great difficulty in raising the money necessary for the transaction, leaving for a time believing in a probable failure. In November, the American investment funds KKR and Hellman & Friedman withdrew from the negotiations. It would ultimately be the Singaporean sovereign fund GIC which would have “ saved the deal ” with the Asian investment company Hillhouse Capital, according to the Bloomberg agency.
A “blow” against the backdrop of a dismal Chinese investment abroad
Long awaited in China, this deal will not fail to restore morale for investors in the middle empire. Far from "redeeming the world" according to a widespread cliché, they finished 2019 at the lowest level in ten years for mergers and acquisitions abroad.
Admittedly, between 2010 and 2018, China was the third foreign investor , behind America and Japan. But after reaching $ 178 billion in 2016, its investments plummeted from $ 128 billion in 2018 to $ 50 billion in the first half of 2019 . In particular, they collapsed in the United States, falling from $ 54 billion in 2017 to $ 2.5 billion in the first six months of 2019. Similarly in Europe, they collapsed by 80% in 2019.
The trade war with Washington and European reluctance towards the bulimia of Chinese investors are not the only factors involved. Beijing has violently applied the brake to limit the flight of capital. Hence a number of divestments, like the Toulouse-Blagnac airport officially sold by the Chinese Casil to Eiffage this Monday, December 30. In contrast, Tencent's success with Universal marks one of the biggest investments of a Chinese company in a major European firm.
► Read also: Chinese Huawei plans to install its first 5G factory in Europe