Music streaming company Spotify and the music arm of China's Tencent Holdings Ltd will buy minority stakes in each other ahead of the Swedish firm's expected stock market listing next year, the companies said on Friday.

The deal will help Spotify, a music streaming leader in Europe and North America, and China-focused Tencent Music, to increase exposure to each other's core markets.

The Wall Street Journal reported last week, citing people familiar with the matter, that the firms were in talks to swap stakes of up to 10 percent in each other.

Tencent Music Entertainment Group (TME), a subsidiary of Tencent Holdings, and Spotify will buy new shares representing minority equity stakes in each other for cash, the companies said in a statement.

"This transaction will allow both companies to benefit from the global growth of music streaming," Spotify founder and CEO Daniel Ek said.

Tencent Holding will also buy a minority stake in Spotify, the companies said, without giving details.

The size of the stakes was not disclosed in the statement and a Spotify spokeswoman declined to provide further details about the agreement.

Tencent owns a majority stake in TME, which is the dominant player in the Chinese market with music service providers QQ Music, KuGou and Kuwo.

"TME and Spotify will work together to explore collaboration opportunities," TME Chief Executive Cussion Pang said.

Source: Reuters Editor: Shen Ke