American hedge fund Pershing Square, led by activist investor Bill Ackman, has announced a substantial transaction proposing to value Universal Music Group (UMG) at as much as 55 billion euros, citing the belief that the music giant is significantly undervalued by the stock markets.
Under this strategic proposal, Pershing plans to merge UMG with its special purpose acquisition company, Pershing Square SPARC Holding, which is poised to be listed on the New York Stock Exchange. This move is aimed at enabling current UMG shareholders to exchange their existing holdings for a combination of cash and shares in the newly formed entity, or opt for an all-cash or all-stock transaction.
Ackman outlined that the cash and stock offer would amount to approximately 30.40 euros (or $35.15) per share for UMG, which encompasses a portfolio of top-tier artists, including the likes of Taylor Swift, The Weeknd, and Lady Gaga. This valuation represents a striking premium of 78 percent compared to UMG’s closing price on April 2. For shareholders choosing to cash out, they would receive 22 euros per share, a notable 29 percent premium.
Despite this ambitious proposal, an analysis indicated that Pershing is unlikely to secure a majority stake regardless of the chosen scenario. To finance the merger, Pershing intends to inject 2.5 billion euros directly while also raising an additional 5.4 billion euros through a debt offering from the new entity. Furthermore, 1.5 billion euros is expected to be raised through the monetization of UMG’s stake in Spotify, which Ackman noted would also yield about 750 million euros for UMG artists.
Having submitted the offer to UMG’s board, Pershing Square aims to finalize the deal by the end of 2026. Ackman highlighted that UMG’s stock price has struggled largely due to factors unrelated to its core music business, identifying concerns such as the uncertainty surrounding French conglomerate Bolloré’s intentions regarding its 18 percent stake in UMG, alongside delays in a potential listing on the US stock market and underutilization of UMG’s balance sheet.
Prior to making the proposal public, Ackman communicated a high-level summary of the deal to Bolloré, who reportedly expressed a supportive stance. “Without Bolloré, we don’t have a transaction,” Ackman remarked, interpreting the response as encouraging. However, Bolloré has not yet commented publicly on the matter.
Pershing Square originally acquired a 10 percent stake in UMG from French media giant Vivendi, which is also linked to Bolloré, back in August 2021. However, it is now understood that Pershing’s stake stands at approximately 4.7 percent, according to reports in the US media.
