Pershing Square Proposes $64 Billion Acquisition of Universal Music Group, Targeting U.S. Listing
Activist investor Bill Ackman's Pershing Square Capital Management has unveiled a substantial cash-and-stock proposal to acquire Universal Music Group (UMG), valuing the music giant at approximately $64 billion, or 56 billion euros. This ambitious transaction aims to merge UMG with Pershing Square SPARC Holdings, an acquisition company, creating a new entity that would transfer its stock listing from Euronext Amsterdam to the New York Stock Exchange.
Proposal Details
Under the terms of the proposed deal, Universal Music shareholders are offered a compelling package. They would receive 9.4 billion euros in cash, equivalent to 5.05 euros per share, alongside 0.77 shares of the newly formed company's stock for each UMG share they hold.
This comprehensive offer values UMG at 30.40 euros per share, or $35.12. Pershing Square highlights that this valuation represents a significant 78% premium to UMG's closing share price on April 2.
The combined company, if the deal proceeds, would establish its base in Nevada.
Rationale and Background
Bill Ackman has expressed his belief that UMG's stock performance has been hampered by external factors, issues he contends the proposed transaction can effectively resolve. He pointed to several contributing elements, including the ongoing uncertainty surrounding Bollore Group's 18% stake, the postponement of UMG's U.S. listing, and what he characterized as suboptimal shareholder communications.
Ackman has been a vocal advocate for UMG, which he identifies as the world's largest music company, to transition its primary listing to the U.S. He asserts that the stock currently trades at a discount to its intrinsic value with limited liquidity.
UMG, home to global artists such as Taylor Swift, Bad Bunny, and Lady Gaga, was originally spun out of French media group Vivendi. It subsequently commenced trading on the Euronext Amsterdam stock exchange in 2021, with an initial valuation of 46 billion euros.
Market Reaction and Outlook
Following the announcement of Pershing Square's proposal, shares of Universal Music saw a notable surge, increasing by over 10% in midday trading in Amsterdam.
Universal Music Group has yet to issue a public statement regarding the offer. Pershing Square remains optimistic, anticipating that the proposed transaction could reach finalization by the close of the current year.
Previous Attempt
This current proposal is not Ackman's first foray into UMG. It follows a prior attempt in 2021, which saw him withdraw from a deal that would have secured a 10% stake in Universal Music. At that time, Ackman cited inquiries from the Securities and Exchange Commission (SEC) concerning whether the structure of a special-purpose acquisition company (SPAC) would permit such an acquisition under New York Stock Exchange regulations. Notably, Pershing Square SPARC Holdings, the acquisition company involved in the current proposal, received SEC approval in 2023, addressing previous regulatory concerns.