Pershing Square SPAC to acquire 10pc of Universal Music

Pershing Square announced on Friday that the special-purpose acquisition company Pershing Square Tontine Holdings (PSTH) is in discussions with Vivendi to acquire 10% of the outstanding shares in Universal Music Group (UMG) for about $4bn (£2.84bn), representing an enterprise value of €35bn (£30.05bn) for UMG.

The FTSE 100 company said later in the year, after Vivendi completes its previously-announced listing of UMG on Euronext Amsterdam, PSTH was planning to distribute the acquired UMG shares to its shareholders.

It said UMG had a number of strategic attributes and competitive advantages, including having a number one industry market share in a stable competitive environment, with an “iconic” management team.

Pershing Square described UMG as operating in a “massive and growing” total addressable market, with the global consumer adoption of streaming set to generate “many years” of growth.

It added that the predictable, recurring revenue streams of UMG required minimal capital despite high growth, with a “significant” fixed-cost expense base allowing for long-term margin expansion.

The company also highlighted the “minimal” financial leverage at less than 1x net debt-to-EBITDA, adding that UMG would be “the only uncontrolled, pure-play” major music content company, with an “independent, high-quality” board of directors.

PSTH shareholders would own three separately-traded securities following completion, including their pro-rata share of UMG ordinary shares, which at cost including transaction expenses represented about $14.75 per PSTH share, before accounting for any dilution from the redeemable warrants.

They would also own their pro-rata share of PSTH after the distribution of the acquired UMG shares, representing around $5.25 in cash per share before dilution.

Finally, they would hold one transferable five-year right per share of Pershing Square SPARC Holdings, which is expected to trade on the New York Stock Exchange.

“Universal Music Group is one of the greatest businesses in the world,” said Bill Ackman, chief executive officer of Pershing Square Tontine Holdings.

“Led by Sir Lucian Grainge, it has one of the most outstanding management teams that I have ever encountered.

“Importantly, UMG meets all of our acquisition criteria and investment principles as it is the world’s leading music company, with a royalty on the growing global demand for music.”

At 0833 BST, shares in Pershing Square Holdings were up 0.25% at 2,616.63.