TENCENT Holdings Ltd. is in talks to buy up to 20 percent of Universal Music Group (UMG) from Vivendi SA, valuing the music label of Lady Gaga, Ariana Grande and the Beatles at around 30 billion euros (US$34 billion), as both firms look to expand in a recovering global music market.

While at a preliminary stage, the discussions highlight Tencent’s role as gatekeeper to China’s growing music market and its interest in global expansion. It also highlights Universal’s ambition in new markets and embrace of online streaming.

Global music-streaming retail sales are expected to more than double to US$45.3 billion by 2026 from US$19.6 billion in 2018, U.K.-based media analysis firm Midea predicts.

French media group Vivendi, controlled by billionaire Vincent Bollore, said Tuesday that Tencent would first buy 10 percent of Universal, the world’s biggest music label ahead of Sony Music Entertainment and Warner Music and home to artists also including Taylor Swift, Drake and Kendrick Lamar.

Tencent, which already holds stakes in the world’s most popular music streaming service, Sweden’s Spotify, India’s Gaana, Tencent Music Entertainment Group, and owns Asian streaming app Joox, would also have an option to buy a further 10 percent of Universal.

“The valuation looks good, and the progress made on the UMG deal is also positive,” said Gregory Moore, fund manager at Keren Finance, which owns Vivendi shares. Both groups are also “considering areas of strategic commercial cooperation,” Vivendi said, raising questions among analysts over the scope of the talks.

Universal rivals Sony Music and Warner Music also have investments in Tencent Music Entertainment Group.

Jerry Dellis, an analyst at Jefferies, also said in a note to clients that U.S. political opposition to Chinese investment in what could be considered a strategic asset could obstruct a deal.

A deal with Tencent could boost Universal’s presence and build on a partnership struck two years ago, under which Tencent can license Universal’s music for distribution over its streaming platforms.

Tencent’s music unit also owns exclusive rights to sub-license Universal’s content to other content providers in China. They worked together to build Abbey Road Studios, China, a recording studio named after the Beatles’ studio in London.

(SD-Agencies)