Tencent Makes Bid for Rival Music Streaming Company
Internet giant Tencent Holdings (TCEHY) has agreed to buy a controlling stake in China Music for $2.7 billion.
China Music is the country's leading music-streaming company. The tie-up with will create a dominant competitor in the online-music market, people familiar with the matter told the Wall Street Journal.
Tencent is said to have upped its stake of China Music to about 60% from 16%. The online games company also runs its own music streaming business.
China Music owns Kugou and Kuwo. Kugou is the country's largest mobile music service, with 28% of market share. Tencent-owned QQ Music holds 15% of market share and Kuwo's has 13%, according to data from iiMedia Research.
Tencent has been attempting to monetize its streaming service by introducing premium subscriptions that allow users access to more songs and better quality sound.
There were 449 million mobile-music users in China in the first quarter.
Financial terms have not been disclosed but a person familiar told Reuters the new company could be valued at $6 billion.
"The new company will be the flagship for Tencent's digital music and related businesses," Tencent president Martin Lau said in a statement.
China Music had been planning an initial public offering in the U.S. prior to the acquisition. It was reported in May that it was working with Goldman Sachs and Morgan Stanley on the IPO, which was expected to raise between $300 million and $600 million.
Online entertainment has become fiercely competitive in China, with top companies including Alibaba (BABA) - Get Report and Tencent vying for customers.
Tencent's shares rose as much as 1% today, closing 0.60% up in Hong Kong.