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Media & Entertainment

Tencent unit holds 1.6% stake in Warner Music: SEC filing

Chinese net company hedges against possible slowdown with investments abroad

Tencent Music Entertainment publicly listed its shares on the New York Stock Exchange in December 2018.    © Reuters

GUANGZHOU -- Chinese internet services giant Tencent Holdings has acquired a stake in Warner Music Group, a major U.S. music label and publisher, through a subsidiary, a report to U.S. regulators has revealed.

The Tencent unit has purchased a 1.6% stake in Warner Music Group worth around $240 million, based on the U.S. company's current share price. Tencent hopes to expand its music and other entertainment businesses through the investment.

Warner Music submitted a report on the identity of its shareholders to the U.S. Securities and Exchange Commission on June 12. According to the report, Tencent Music Entertainment Group, the Chinese company's music-streaming unit, has purchased 8 million Warner Music shares.

The stake purchase comes as Tencent tries to diversify into new areas such as gaming through its popular WeChat messaging app. WeChat has more than 1.2 billion users.

Tencent has been an aggressive buyer of stakes in overseas entertainment companies in recent years, including its purchase of 10% of U.S.-based Universal Music Group, the world's biggest music company, which, in turn, is part of French media giant Vivendi.

Tencent's investment in Warner Music Group takes place against a backdrop of tightening government restrictions in China on creative content, including games and TV dramas.

Limiting itself to the Chinese market is a risk for the company. Tencent appears to be hedging against the possibility of a sharp slowdown in the growth of its domestic business by investing in a range of companies overseas.

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