Universal Music Group has repurchased €250 million ($290.8 million) worth of its stock from Bill Ackman’s Pershing Square. The company bought 14,156,285 shares priced at €17.66 ($20.48) apiece.
UMG said that the repurchased shares were executed outside of its existing €500 million share buyback program, but were part of a previous €500 million share buyback authorized by the board at its annual general meeting of shareholders in May.
It will use the repurchased shares to meet its obligations under the 2022 Universal Music Group Global Equity Plan and to “reduce the share capital” of the company. The maximum number of shares that can be used for purposes of the equity plan will remain unchanged.
On Wednesday, Bloomberg reported that Pershing was looking to exit its 4.7% stake, selling roughly 80.6 million shares in an overnight placing with Bank of America marketing the shares in a range of €17.66 ($20.48) to €18.62 ($21.60) apiece. At the top of the marketed range, that would raise around €1.5 billion of proceeds.
The move comes after UMG rejected a a $64.4 billion cash and stock takeover bid from Ackman to form a newly merged company between Pershing and UMG that would list on the New York Stock Exchange. If approved, the deal was expected to close by year end.
Pershing said at the time that it was submitting the bid due to UMG’s “languishing” stock price, which Ackman blamed on the postponement of UMG’s listing in the United States, uncertainty related to Bolloré Group’s 18% stake in the company, the “underutilization of UMG’s balance sheet, which has led to reduced returns on equity,” the absence of a “publicly disclosed capital allocation plan and earnings algorithm,” a lack of investor credit in UMG’s valuation for its €2.7 billion stake in Spotify and “suboptimal shareholder investor relations, communications and engagement.”
However, UMG’s board unanimously determined last week that the proposal “fundamentally and materially undervalues” the company and was “not in the best interests of UMG, its shareholders, artists, songwriters, employees and other stakeholders.”
Following Pershing’s proposal, UMG said it would monetize half of its Spotify stake to help fund an increased share buyback program. UMG also said it would provide the market with enhanced financial disclosure so that its business can be better assessed and understood.
In April, the board authorized an increase in the size of its share repurchase program to €1 billion. At the time, UMG said it would initiate a €500 million buyback following completion of a separate €500 million repurchase program that’s already underway. It noted that the buyback is subject to market conditions and shareholder approval.
Shares of UMG, which fell 4% to €18.40 apiece on Thursday, are down 14% in the past six months, 16% year to date and 32.9% in the past year.
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