Investopedia/Donna Fuscaldo: Tencent Music to Sell 3%, Valuing Itself at $10B

Tencent Music to Sell 3%, Valuing Itself at $10B

By Donna Fuscaldo | September 1, 2017 — 2:02 PM EDT
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Tencent Music Entertainment Group, the unit of China’s largest social network operator, Tencent (TCEHY), is looking to sell around 3% of its business hoping to garner a valuation of around $10 billion.

People familiar with the matter told Bloomberg the fundraising is ahead of an initial public offering for the Chinese entertainment company. The company, which owns karaoke and music streaming apps, is in talks to sell the stake to strategic partners such as record labels. It’s parent, Tencent owns a 62.45% stake in the company as of the end of 2016, reported Bloomberg. (See also: Alibaba, Tencent to Get Most of China Fintech Mkt.)
Elbowing Alibaba

The idea behind selling a piece of the company to record labels is so that it can maintain the rights to stream music in a market that is getting more competitive. Alibaba Group (BABA), China’s largest e-commerce company is a competitor in that space, as is NetEase Inc., both of which have been trying to acquire more content and services that support digital consumption. In March, Alibaba acquired the remaining stake in Damai.cn, the online ticketing platform, that it didn’t already own. "Damai.cn will be a powerful platform to distribute our media content as well as expand our user reach and engagement," Alibaba told Reuters at the time, noting there will be synergies with Alibaba Music, Alibaba Pictures and Youku, its entertainment units. The streaming market in China is expected to reach $664 million in subscription revenue next year, noted Bloomberg. (See also: Alibaba Gets Full Control of Ticketing Co. Damai.)

Tencent Music Entertainment has has been in a race with its rivals to acquire content to cater to the increasing number of Chinese consumers who are accessing their entertainment over the internet and on mobile devices. It already has big-name artists as partners including Taylor Swift and Beyonce and is inking content deals with the likes of Universal Music Group, Warner Music Group and Sony Music, noted Bloomberg. What’s more, Tencent has arrangements with Huayi Brothers Media Corp. and Korea’s YG Entertainment, which are among the most powerful record labels in the country, noted the report. The fundraising on the part of the Tencent unit comes at a time when the Chinese social network operator and owner of the popular WeChat messaging app’s business is booming and so is its stock price. Shares are up more than 70% since the start of the year.
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