This undated photo shows a view of the Tencent Binhai Building, the Chinese tech giant's headquarters, in Shenzhen, Guangdong province. (PHOTO PROVIDED TO CHINA DAILY)

Tencent Holdings Ltd is planning to increase its stake in Universal Music Group by a further 10 percent before the option expires in January, according to people familiar with the matter.

The Chinese mainland technology company last year led a consortium that purchased 10 percent of the world’s biggest music company from French media company Vivendi SA. That deal valued Universal Music at 30 billion euros (US$35.2 billion) and Tencent and its partners have the option to increase their stake to as much as 20 percent at the same valuation until Jan 15, 2021.

The Chinese mainland technology company last year led a consortium that purchased 10 percent of the world’s biggest music company from French media company Vivendi SA

Tencent is likely to exercise this option, three people said, asking not to be identified as the deliberations are private. It could make the move before year-end, one person said.

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Shares of Tencent listed in the Hong Kong Special Administrative Region rose as much as 2.2 percent in early trading Wednesday, reaching a record of HK$569.5 (US$74.48) each. Tencent’s American Depositary Receipts achieved a record closing price of US$74.04 in Tuesday’s US session, after Apple Inc announced its game League of Legends: Wild Rift would be coming to iPhone 12.

It isn’t clear whether Tencent will be joined by the original consortium members, the identities of which haven’t been made public, the people said. Hillhouse Capital and Singapore sovereign wealth fund GIC Pte were among potential investors that Tencent approached, Bloomberg News reported last year.

Deliberations are ongoing, and Tencent could still opt not to increase its stake in Universal Music, one of the people said. Representatives for Tencent and Vivendi declined to comment.

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By increasing its stake, Tencent would seek to diversify from gaming and the mainland, where it has been busy with deals this year. It’s helped orchestrate the combination of Huya Inc and DouYu International Holdings Ltd, creating a mainland game-streaming giant with a market value of more than US$11 billion. It has also proposed to take private mainland gaming firm Leyou Technologies Holdings Ltd.

Universal Music has been boosted by a surge in streaming that has dragged the industry out of a decade-long slump. The music business has helped Vivendi hold up through the pandemic lockdown, limiting the blow from a drop in advertising and publishing revenue.

A deal by Tencent will counter a recent venture by rival NetEase Inc, which in August struck a deal to license songs from Universal Music for the first time. 

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An initial public offering of Universal Music is planned by early 2023, according to a Vivendi statement in February. An entry onto the stock market could give the music group more financial clout to compete with rivals Warner Music Group and Sony Music Entertainment. Tencent also plans to take a minority stake in Universal Music’s mainland subsidiary.