Bill Ackman’s Pershing Square Capital Management has unveiled a non-binding proposal to the board of music giant Universal Music Group (UMG), the musical home of stars like Taylor Swift and Kendrick Lamar, to acquire all of its outstanding shares in a blockbuster deal worth approximately $63.5 billion, “along with a value creation plan designed to deliver significant benefits to UMG’s stakeholders.”
Pershing, which has held a stake in the music major since 2021, said its offer values each UMG share at 30.40 euros, putting the total value of UMG under the overall deal at about 55 billion euros, or $63.5 billion.
“Since UMG [stock market] existing, [UMG chairman and CEO] Bill Ackman, CEO of Pershing Square, said: “Sir Lucian Grainge and the company’s management have done an excellent job in nurturing and continuing to build a world-class artist roster and generating strong commercial performance. However, UMG’s share price has been weakened by a range of issues that are unrelated to the performance of its music business and, importantly, all of them can be addressed through this transaction.”
Pershing Square said it “believes that the underperformance of UMG’s share price is primarily due to the following factors”: uncertainty over Bolloré Group’s 18 percent stake in the company, and UMG’s US deferral. [stock market] The listing, underutilization of UMG’s balance sheet, resulting in low returns on equity, absence of a stated capital allocation plan and earnings algorithm, lack of investor credit in UMG’s valuation of its €2.7 billion (US$3.1 billion) stake in Spotify, and suboptimal investor relations, communications, and engagement.
In the proposed transaction, UMG will be merged with Pershing Square SPARC Holdings, and the newly combined company will become a Nevada company listed on the New York Stock Exchange. “We expect to close the deal by the end of the year,” the company said. “Shareholders will receive a total of €9.4 billion in cash (or €5.05 per share) and 0.77 shares of new UMG stock for each UMG share held. New UMG will publish financial statements under US GAAP and will be eligible for inclusion in the S&P 500 and other indices. The transaction will enable the cancellation of 17 percent of UMG’s outstanding shares while maintaining the company’s investment-grade balance sheet and its long-term financial and strategic flexibility.”
All equity financings will be supported by Pershing Square and its subsidiaries, with all debt financing committed at signing.
