Billionaire investor William Ackman-backed blank-cheque company has signed a deal to buy a 10 percent stake in Universal Music Group from French Media company Vivendi SE. The deal is worth USD 4 billion, both companies confirmed. The announcement came apparently at a very strange time to capture a time when the global stock markets are not working. The final agreement between the companies is expected to be finalized by September 15. This is a first-of-its-kind transaction for a special acquisition company. UMG is the world’s largest music company and is valued at USD 40 billion. Under the deal, Ackman’s investment company Pershing Square Tontine Holdings will distribute the shares to shareholders only when the owner of Universal Music Group would complete its planned listing. UMG is planning a listing of its stock on the stock exchange Euronext Amsterdam. Vivendi is a French media conglomerate that owns UMG. Even after the transaction, Pershing Square Tontine Holdings will continue to exist with USD 2.9 billion in cash.
The hedge fund billionaire had made public his interest in aligning with a corporation of such size. As per the discussion, the value of the Universal Music Group is around 40 billion. According to insiders, once the deal is finalized, it would be the biggest SPAC transaction to date. Chief Executive Officer and chairman Lucian Grainge said that the deal is a strong validation of UMG. “This strongly validates our strategy and our amazing list of artists and songwriters. Another important thing is that now we have a powerful consortium in addition to the Vivendi. Led by Tencent and Pershing Square Tontine, the consortium is also a very powerful endorsement,” Grainge said.
Vivendi had earlier said that the Universal Music Group would be spun off a separate entity to trade on stock exchange Euronext. This will be done after Vivendi distributes shares among shareholders. The company has fixed the deadline for September. Also, a 20 percent stake at UMG has been acquired by China’s Tencent. So, Vivendi will be effectively left with only a 20 percent stake in the company. As reported earlier, Vivendi was considering selling half of its stake. Pershing Square has shares in various companies, but it is for the first time when the company will take a stake in any other media or entertainment properties. Last month, UMG was valued at a whopping USD 53 billion. This was a massive jump from last year’s evaluation when it was USD 36 billion. The value of music companies has increased in recent years. This is mainly because of companies getting more royalty payments from streaming platforms like Spotify. According to a statement by Pershing Square Tontine Holdings, the operating profit growth of UMG has been more than 20 percent per year since 2017. As per an estimate by Midia Research, Universal commands around 30 percent share of the market.