Tencent in Talks to Buy Stake In Warner -- WSJ
30 May 2020 - 8:02AM
Dow Jones News
By Corrie Driebusch and Anne Steele
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 30, 2020).
Tencent Holdings Ltd. is in discussions to buy a stake in Warner
Music Group as part of the record company's initial public
offering, a key test for a new-issue market that has been hobbled
by the coronavirus pandemic.
The Chinese internet giant is discussing an investment of $200
million ahead of an IPO that is slated for next week, according to
people familiar with the matter.
Warner Music is also working to line up institutions that, along
with Tencent, would serve as anchor investors contributing a total
of more than $1 billion toward a fundraising goal of as much as
$1.8 billion, the people said. The offering is expected to value
Warner Music at $11.7 billion to $13.3 billion and is set to begin
trading June 3.
That would make it the biggest IPO of 2020, according to data
from Dealogic. It will also serve as an indication to other
companies seeking to go public of whether it is safe to do so after
the pandemic brought IPOs to a virtual standstill.
Signs of a thaw have been evident in recent weeks as the U.S.
stock market has climbed back to levels it traded at in March,
helping stoke investor appetite for new listings.
Raising a big chunk of the expected proceeds ahead of time to
help bolster demand from other investors in what is still a highly
uncertain time is emerging as a common theme.
ZoomInfo Technologies Inc., a software company pitching shares
to investors ahead of its IPO next week, secured BlackRock and
Fidelity as anchor investors.
Albertsons Cos. got an endorsement ahead of its IPO through an
investment from Apollo Global Management Inc., with the buyout firm
agreeing recently to buy $1.75 billion in convertible preferred
stock. The grocery giant plans to launch a roadshow to market its
IPO as early as next month, according to people familiar with the
matter.
It is far from business as usual in the market for new issues.
Both Warner Music and ZoomInfo's executive teams are in the middle
of virtual roadshows. Instead of crisscrossing the country via
airplane to meet with large fund managers and analysts in
conference rooms, as is custom, they are sitting behind computer
screens trying to convince investors to buy their stock over
video.
Warner Music, home to recording stars including Cardi B, Ed
Sheeran and Madonna, plans to sell 70 million shares -- 13.7% of
its stock -- for $23 to $26 apiece. Billionaire Len Blavatnik,
through his Access Industries Inc., will retain voting control of
the company. The IPO is being led by Morgan Stanley, Credit Suisse
Group AG and Goldman Sachs Group Inc., among others.
Warner Music owns labels Elektra Records and Atlantic Records in
addition to its flagship Warner Records, as well as the
third-largest music publisher, Warner Chappell Music. It has been
among the biggest beneficiaries of a resurgent music industry.
Following years of pressure from online piracy and the collapse
of compact-disc sales, the record business has been growing for
four years thanks to revenue from subscriptions to streaming
services like those offered by Spotify Technology SA and Apple Inc.
Global recorded-music revenue grew 8.2% last year to $20.2 billion,
according to the International Federation of the Phonographic
Industry, with streaming accounting for more than half of the total
for the first time.
The Warner investment would further reinforce Tencent's growing
presence in the music industry. It swapped stakes with Spotify in
2017 ahead of the music-streaming giant's listing. Vivendi SA sold
a 10% stake in Universal Music Group to Tencent for EUR3 billion
($3.36 billion) late last year, valuing the world's largest music
company at more than $33 billion. In February, the French media
conglomerate teased a public offering of the subsidiary, saying
negotiations to sell an additional minority stake at a similar
valuation were ongoing and that an IPO is planned for early 2023 at
the latest.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Anne
Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
May 30, 2020 02:47 ET (06:47 GMT)
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