Billionaire Bill Ackman’s hedge fund, Pershing Square, has announced a proposal to acquire Universal Music Group (UMG), valuing the world’s leading music company at approximately €55 billion (£48 billion). This potential acquisition includes a combination of cash and stock and involves acquiring a business that boasts an impressive artist roster, including heavyweights like Taylor Swift and Elton John.
In a formal statement, Ackman praised the efforts of UMG’s CEO, Sir Lucian Grainge, asserting that the company has excelled in nurturing and expanding its artist lineup while showcasing strong business performance. However, he pointed out that UMG’s stock price has not reflected this success, citing factors unrelated to the performance of its music operations as the cause for its lagging shares.
Since being listed on the Amsterdam stock exchange in 2021, UMG shares have experienced a significant decline, losing over 25% of their value in the past year alone. Following the news of Pershing’s acquisition proposal, shares rose by 11%, showing investor optimism regarding the potential deal.
UMG is a major player in the music industry, classified among the “big three” record labels, alongside Sony Music Entertainment and Warner Music Group. The company’s diverse roster includes artists from various genres, including classical and contemporary pop sensations like Adele, Drake, and Ariana Grande.
Ackman highlighted several reasons for UMG’s recent underperformance, including delays in the company’s US listing, suboptimal utilization of its financial resources, and the uncertainty surrounding the French conglomerate Bolloré Group, which holds an 18% stake in UMG. The Bolloré Group, led by billionaire Vincent Bolloré, is UMG’s largest single shareholder, with an additional 10% held by Vivendi, another investment firm under the Bolloré family’s control.
Furthermore, Ackman indicated a need for better investor confidence in UMG’s valuation, particularly concerning its €2.7 billion stake in the popular music streaming platform, Spotify.
Pershing Square, founded in 2004 and currently managing over $26 billion in assets, originally acquired a 10% stake in UMG in 2021. Although Ackman stepped down from UMG’s board last year to focus on other commitments, he remains deeply involved in this acquisition proposal.
The planned deal includes the appointment of Michael Ovitz, a seasoned talent agent, as the new chair of UMG’s board, alongside two representatives from Pershing Square. As part of this transition, a revised employment contract and compensation framework for Sir Lucian Grainge will be established. Grainge’s compensation package exceeded €41 million last year, encompassing a €4.4 million base salary and substantial bonuses totaling over €30 million.
Under the proposal, UMG would merge with a special purpose acquisition company (SPAC) established by Pershing Square and subsequently list on the New York Stock Exchange. UMG shareholders would receive €9.4 billion in cash and 0.77 shares of the new entity for each share they hold, translating to a remarkable 78% premium over the closing share price from the preceding Thursday.
UMG has yet to comment publicly on the acquisition proposal. Following the news, shares in the company saw an initial increase of 12%, reaching €19.18 in early trading.
