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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