Tencent Acquires $200 Million Stake in Warner Music

Jem Aswad and Rebecca Davis
·3 min read

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UPDATED: Tencent Music Entertainment and its parent company Tencent Holdings together have acquired a stake in Warner Music Group worth $200 million, according to SEC filings by the companies. They each hold 5.2% of total outstanding Class A common stocks in WMG, according to the filings.

“We invested in Warner because of the positive outlook for the global music market, and our aim of working closely with labels to drive the pace for streaming models in China,” a rep tells Variety.

The deal, while amounting to a relatively small percentage of Warner’s value, which is estimated at around $16 billion, gives Tencent a stake in two of the world’s three major label groups: Late last year, Tencent closed a deal to acquire 10% of the world’s largest music company, Universal Music Group, which was recently valued at a whopping $33 billion; Tencent also has an option to purchase another 10%. However, Tencent’s stake in both UMG and Warner is non-controlling, which means it has no influence over their activities.

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Reps for Warner declined Variety‘s requests for comment.

The move took place on June 3, the day WMG debuted on Nasdaq. The news of the Tencent Music acquisition was first reported by Reuters. The Wall Street Journal reported late last month that Tencent Holdings was in talks to acquire a $200 million stake in Warner.

Tencent Music launched its own IPO in 2018, with Warner and Sony Music acquiring $200 million in shares.

Add to that, late in 2017, Tencent Music and Spotify, the world’s largest streaming platform, essentially swapped stakes worth 10% of their respective companies. Sony and Universal both hold stakes in Spotify as well, which was part of a deal that saw the streaming giant striking a deal with the three majors and indie-label collective Merlin that gave the four entities around 18% of the company. After Spotify went public in 2018, the four reaped a windfall of profits: Merlin distributed 100% of its profits to its members; Warner sold all of its shares for $504 million; Sony sold half of its shares for around $768 million; Universal has held onto its shares.

Warner, which was previously owned entirely by Len Blavatnik’s Access Industries, first announced its intention to launch an IPO in February, but shortly afterward, on March 2, delayed it when the coronavirus pandemic took effect in the U.S. and Europe. Access purchased Warner in 2011 for $3.3 billion.

 

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