Ackman's Pershing Square Proposes to Buy Universal Music

Pershing Square proposes $64 billion Universal Music merger with acquisition company

Details and Implications of the Pershing Square and Universal Music Group Merger Proposal

April 7 (Reuters) - Bill Ackman's Pershing Square on Tuesday proposed merging its acquisition vehicle with Universal Music Group with a plan to list in the United States in a deal aimed at reviving the world's biggest music label's value.

Valuation and Offer Structure

Pershing Square's cash-and-shares offer values Universal Music at around 30.40 euros per share, representing a 78% premium to last close price at 17.10 euros and making the deal worth 55.75 billion euros ($64.31 billion), according to Reuters calculation.

Universal Music Group and Market Reaction

Universal Music Group - the company behind recording artists including Taylor Swift, Billie Eilish and Drake - did not immediately respond to a request for comment.

The Amsterdam-listed entertainment company's shares jumped around 13% in the early trading on Tuesday, while top shareholder Bollore Group's were up 6%.

Strategic Rationale and Listing Plans

Pershing’s Motivation for a New York Listing

PERSHING HOPES NEW YORK LISTING WILL BOOST UMG SHARES

Pershing's move comes after UMG last month delayed a plan for a U.S. listing, walking back on an agreement with Pershing, which had exercised its right to request a U.S. offering and had argued a New York listing would boost UMG's share price and liquidity.

Management Performance and Share Price Concerns

In a letter to UMG directors, Ackman said its management had done an "excellent" job of running a strong business and strategic execution, but its share price has languished since its listing in 2021.

He blamed uncertainty over the 18% stake held by Bollore Group, the delay to the planned U.S. listing and underutilisation of its balance sheet, among other things.

Deal Structure and Board Changes

Under Tuesday's non-binding proposal, Pershing's SPARC Holdings would merge with UMG and the new entity, to be called Nevada Corporation, would be listed on the New York Stock Exchange.

Talent agent and former Walt Disney Company president Michael Ovitz would join the UMG board as chairman, Pershing Square said.

Shareholder Impact and Funding

Shareholder Terms and Funding Sources

Pershing Square said that under the transaction UMG shareholders would receive a total of 9.4 billion euros in cash and 0.77 shares in Nevada for every share held in UMG.

The cash portion of the new proposed deal would be funded by Pershing from its SPARC's rights holders, debt, and net proceeds from the company's stake in Spotify, it said.

Responses from Major Shareholders

Bollore Group did not immediately respond to a request for comment.

A spokesperson for Vivendi, which is UMG's second-largest shareholder, did not comment on the proposal.

Tencent Holdings, UMG's third-biggest shareholder, did not immediately respond to a request for a comment.

Timeline and Additional Information

The transaction is expected to close by the end of the year, Pershing Square said. It has a 4.7% stake according to LSEG data, making it UMG's fourth-biggest shareholder.

($1 = 0.8674 euros)

(Reporting by Gnaneshwar Rajan in Bengaluru and Mateusz Rabiega in Gdansk; Additional reporting by Che Pa in Beijing, Inti Landauro and Mathieu Rosemain in Paris, Jerome Terroy in Gdansk; Editing by Sonia Cheema and Joe Bavier)