Narrative
Full Description
Project narrative
On December 31, 2019, a consortium — led by Cayman Islands-incorporated Hong Kong Stock Exchange-listed Chinese internet company Tencent Holdings Limited and including Cayman Islands-incorporated Tencent Music Entertainment Group and other unpublicized co-investors — signed an agreement with French investment firm Vivendi S.E. to purchase a 10% equity stake in Universal Music Group (UMG) for €3 billion EUR, with an option to acquire another 10% equity stake in UMG for €3 billion EUR until January 15, 2021. Then, on or around January 22, 2020, a syndicate of five banks — the Bank of China (BOC), the Industrial and Commercial Bank of China (ICBC), Bank of America, HSBC, and Morgan Stanley — entered into a €1.3 billion EUR ($1.1 billion USD; RMB 10.2 billion) syndicated loan agreement with Concerto Investment B.V. — a Netherlands-incorporated SPV for the Tencent-led consortium — to finance the acquisition of the 10% equity stake in UMG. This loan carried a maturity period of five years. The five lenders served as mandated lead arrangers and Morgan Stanley served as sole structuring agent. Record ID#107826 captures BOC's contribution. Record ID#107827 captures ICBC's contribution. UMG was not a legal entity but consisted of two entities under common ownership: Universal Music Group, Inc. (UMGI) was an United States-incorporated company and Universal International Music B.V. (UIM) a Netherlands-incorporated firm. Together, they formed Dutch-American record and music holding group UMG, the world's largest record group. UMG had three main operating businesses: recorded music (discovery, development, and promotion of artists), music publishing (discovery and development of songwriters and owning and administrating copyright of music), and merchandising (production and sale branded products). It had offices in Hilversum, Netherlands, and in Santa Monica, California, United States. UMGI was focused on U.S. operations while UIM was focused internationally, with business in over 60 territories include Japan, United Kingdom, Germany, France, South Korea, Canada, China, Latin America, and Australia. Artists under UMG included ABBA, Louis Armstrong, The Beatles, The Beach Boys, The Bee Gees, Andrea Bocelli, James Brown, Bon Jovi, Neil Diamond, Marvin Gaye, Guns N’ Roses, Elton John, Bob Marley, Paul McCartney, Nirvana, Luciano Pavarotti, Queen, The Rolling Stones, Frank Sinatra, U2, Amy Winehouse and Stevie Wonder, as well as many of the biggest artists today, such as J Balvin, Justin Bieber, Luke Bryan, Lewis Capaldi, J. Cole, Daddy Yankee, Drake, Billie Eilish, Eminem, Selena Gomez, Ariana Grande, Imagine Dragons, Lady Gaga, Kendrick Lamar, Lang Lang, Post Malone, Shawn Mendes, Kacey Musgraves, Katy Perry, Gregory Porter, Olivia Rodrigo, Sam Smith, Taylor Swift, Carrie Underwood, Keith Urban, and The Weeknd. In 2019, it had revenues of €7.2 billion EUR. The acquisition was expected to help UMG further develop in Asia. UMG also agreed in a separate agreement to give Tencent Music Entertainment Group the option to acquire a minority equity stake in UMG's Greater China business within two years of the acquisition. The acquisition was expected to be closed by the end of the first half of 2020. The acquisition was completed on March 31, 2020. On December 17, 2020, the Tencent-led consortium exercised the call option to acquire another 10% stake in UMG, which was completed on January 29, 2021. On February 26, 2021, Universal Music Group, Inc. and Universal International Music B.V were placed under direct common owner of Universal Music Group B.V., which Tencent held 20% in and Vivendi held 80% in. The mandated lead arrangers, including Morgan Stanley, HSBC, Bank of America, Bank of China, and ICBC in connection with a €1.3 billion financing of the acquisition by Tencent Holdings’ of an additional significant stake in US music entertainment company Universal Music Group.
Staff comments
1. The individual contributions of the five lenders to this €1.3 billion EUR syndicated loan agreement is unknown. For the time being, AidData has estimated the contributions of BOC and ICBC by assuming each lender contributed equally (€260,000,000 EUR) to the loan syndicate. 2. The specific borrowing institution is unclear. However, Concerto Investment B.V. was the entity that acquired the 10% stake, and therefore AidData assumes that it or an affiliated special purpose vehicle was the borrower. This issue merits further investigation. 3. Morgan Stanley acted as the exclusive financial advisor to the Tencent-led consortium and the sole structuring agent to the financing. Davis Polk & Wardwell acted as the legal advisor, Deloitte acted as the accounting and tax advisor, and FTI Consulting acted as the commercial advisor to the Tencent-led consortium.