Billionaire investor Bill Ackman has launched a $65-billion bid to purchase Universal Music, or UMG, the label representing some of music’s biggest names like Taylor Swift, Kendrick Lamar and Bad Bunny.
As part of the proposed deal, UMG would merge with Ackman’s investment firm, Pershing Square Capital Management, and the company’s stock listing would be relocated from Amsterdam to the New York Stock Exchange.
Pershing Square already holds more than 4.5% of the music giant’s shares. Ackman said the move to a U.S.-based stock exchange would increase the value of UMG.
“UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business and importantly, all of them can be addressed with this transaction,” said Ackman in a statement.
The proposed deal includes Universal Music merging with Pershing Square SPARC Holdings, an acquisition company approved by the U.S. Securities and Exchange Commission in 2023. If approved by investors, the transaction could close at the end of the year, according to the company.
Pershing is also reportedly calling for a new board, including former Disney chief Michael Ovitz as UMG chairman, and a new employment contract for current UMG chief executive Lucian Grainge.
Universal Music Group did not respond to a request for comment and has not yet responded to the proposal publicly.
Universal Music Group currently has its corporate headquarters in the Netherlands and has a local L.A. office in Santa Monica. The label was founded in 1996.
Over the years, it’s cemented its reputation as one of the music industry’s “Big Three,” alongside Warner Music Group and Sony Music Entertainment. Universal also controls smaller labels like Republic Records, Interscope Geffen A&M, Capitol Music Group and Def Jam Recordings.
The news has drawn some skepticism, as Ackman will need two-thirds of UMG’s investors to approve the proposed deal, including French billionaire Vincent Bolloré, who is UMG’s largest shareholder with a more-than-18% stake, according to Bloomberg.
Pershing Square has said it believes UMG’s stock price is underperforming, in part because of uncertainty around Bolloré’s 18% stake, reduced returns on equity due to the underutilization of UMG’s balance sheet and the lack of investor credit in UMG’s valuation for its €2.7-billion ($3.13-billion) Spotify stake.
If finalized, UMG shareholders would receive €9.4 billion in cash, around €5.05 per share, or roughly $10.9 billion and $5.84 per share.
Investors would receive 0.77 shares in the new merged company. This would value the total consideration package of cash and stock estimated to be worth €30.40 ($35.21) per share, a 78% premium to UMG’s stock price. The transaction will also include the cancellation of 17% of UMG outstanding shares. The new UMG will have 1.541 billion shares outstanding.
UMG’s stock price has jumped over 11% to €19.05 ($22.06) Tuesday morning due to this potential acquisition.
The post Billionaire investor launches $65-billion Universal Music takeover bid appeared first on Los Angeles Times.
