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Chinese digital giant Tencent has entered negotiations with French media conglomerate Vivendi to buy a 10% stake in Universal Music Group.

Vivendi announced the talks Tuesday, saying that the negotiations were based on a valuation of UMG of €30 billion ($33.6 billion). Tencent’s potential 10% stake would therefore cost €3 billion ($3.36 billion). The deal would give Tencent a one-year option to purchase another 10% stake on the same terms.

Vivendi said the two companies were also exploring other areas of “strategic commercial cooperation” that would help grow UMG, the world’s biggest music company with market share of more than 30% in 2018, through new digital initiatives and territories. In addition, Vivendi is continuing to seek other buyers interested in a stake in its extremely lucrative music unit, which boasts a glittering roster of superstars such as Katy Perry, Lady Gaga and Billie Eilish, as well as divisions dedicated to publishing, merchandise and other sectors.

Tencent is known primarily for its gaming and social network business — it owns China’s powerful WeChat platform, which has 900 million daily users. But the company also has its own music unit, Tencent Music Entertainment Group, which raised more than $1 billion in an IPO late last year that valued the division overall at $21.3 billion. Tencent also holds a 7.5% equity stake in streaming giant Spotify, the result of a share swap in December 2017, making it one of the Swedish company’s biggest shareholders.

Vivendi and Tencent are already familiar interlocutors. In 2017, UMG and Tencent Music struck a multi-year agreement making the latter a distributor of UMG music in China on its QQ Music, KuGou and Kuwo streaming platforms. Tencent Music also has exclusive rights to sub-license UMG’s content in the Middle Kingdom.

In a letter to staff, Lucian Grainge, the CEO and chairman of UMG, hailed the talks with Tencent.

“This is an exciting development for both Vivendi and UMG and affirms once again just how much our strategy and hard work are succeeding,” Grainge wrote. “As Vivendi discussed last week with its investors, we continue to deliver remarkable, record-setting results. Our success is driven by placing our recording artists and songwriters at the center of everything we do and providing them with the industry’s best creative and commercial resources on a global basis.

“Obviously, we remain part of the Vivendi family – today’s announcement is about a minority investment by Tencent. I can assure you that Vivendi’s Supervisory and Management Boards as well as the Bolloré family continue to be steadfast supporters of our strategy, our work and our teams. And it goes without saying, that our commitment to recording artists and songwriters will continue unchanged.”

Tencent had long been rumored to be one of the suitors for a stake in UMG after Vivendi announced a year ago its intention to sell up to 50% of the company. The French media giant ruled out an IPO as an option.

Progress on a potential sale appeared to be slow, as some analysts pushed up UMG’s valuation to as much as $50 billion. UMG has also been hit by a controversy over a fire in 2008 that is estimated to have wiped out 500,000 master recordings in the company’s massive archive.

An insider with knowledge of the sale process told Variety that a deal with Tencent would be strategic because China is primed to become the world’s biggest music market. At the same time, however, the potential deal is also supposed to encourage other investors to get involved in order to keep a Chinese company from gaining too much control of UMG, he said.

In June, Yannick Bollore, chairman of Vivendi’s supervisory board, said that the company was “not in a hurry” and “very confident” it would find the right partner to purchase up to 50% of UMG. He cited the music industry’s “huge growth” as a pace Vivendi wants to maintain in the coming years.

In its latest quarterly financial results, Vivendi reported that its revenues were up nearly 20% to $3.7 billion during the first six months of 2019.

Shirley Halperin and Elsa Keslassy contributed to this report.