China’s Tencent Music To Snap Up Lazy Audio For $417M; Street Is Bullish

China’s Tencent Music Entertainment Group has agreed to buy audiobook platform Lazy Audio, owned by Shenzhen Lanren Online Technology Co. for 2.7 billion yuan ($417 million). Shares of the online music giant Tencent Music rose 2.4% on Friday.

Tencent Music (TME) said that the deal would be financed primarily through cash. In addition, the company would also give certain equity-settled awards to Lazy Audio’s management team following the acquisition. The deal is likely to close in the first half of 2021.

Tencent Music’s CEO Cussion Pang said, “As a leading provider of audio entertainment, Lazy Audio can be seamlessly integrated into our existing long-form audio strategy, enabling us to further monetize the extensive library of high-quality literature IPs [Information Pamphlets] that we have access to through strategic partnerships with China Literature and others.” (See TME stock analysis on TipRanks)

Following the deal, Needham analyst Vincent Yu raised the stock’s price target to $25 (12.6% upside potential) from $21 and maintained a Buy rating. The analyst believes that “the acquisition significantly strengthens TME’s ability to compete with Ximalaya, as the combined audiobook MAUs [monthly active users] for TME can reach ~120 million after the deal closes.”

Overall, the rest of the Street is bullish on the stock. The Strong Buy analyst consensus shows 3 Buys and 1 Hold. The average price target of $22 implies that the shares are more than fully priced at current levels. Shares have gained about 61.6% over the past year.

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