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Additional $1.1 billion deal means Bill Ackman-led entities will control 10% of Universal Music after all

By | Published on Wednesday 1 September 2021

Universal Music

Vivendi has now sold 10% of the Universal Music Group to investment entities led by hedge fund manager Bill Ackman, which was always the plan, but that plan had a good old wobble for a short time.

Vivendi, of course, is getting ready to spin off its music company as a standalone entity that will be listed on the Dutch stock exchange. As that happens, 60% of the shares in the Universal Music Group will be distributed to Vivendi’s current shareholders. 20% will continue to be controlled by a consortium led by Tencent and Vivendi will keep hold of 10%. Which, maths fans all over the world will surely observe, leaves 10% of UMG stock unaccounted for.

An Ackman-led special purpose acquisition company called Pershing Square Tontine Holdings was originally announced as the buyer for that 10% back in June.

Which was odd, because so called special purpose acquisition companies are entities with no current operations that raise money on a stock exchange with the aim of using the cash to buy a private business outright, basically giving that business a back-door stock market listing. SPACs don’t usually buy 10% of an already publicly listed company.

Sufficiently odd was this arrangement, in fact, that it all fell through.

After some of the investors in Pershing Square Tontine Holdings responded to Ackman’s UMG deal with a collective “erm?” – while US regulator the SEC delivered a concerning “what?” – Ackman abandoned the SPAC purchase of Universal stock. Though that didn’t stop one of PSTH’s investors from suing, alleging that the entity was in fact a more conventional investment fund masquerading as a SPAC to avoid some regulation. Though that’s something Ackman strongly denies, we should add.

Meanwhile, as he called off the PSTH/UMG deal, Ackman announced that he still planned to buy into the music major, which was a shit hot investment opportunity even if the smelly investors back at PSTH didn’t agree. I’m paraphrasing slightly there. With that in mind, Ackman said, he would still acquire up to 10% via other investment entities that he controlled.

Then last month Pershing Square Holdings – which must never be confused with Pershing Square Tontine Holdings – announced it had agreed to buy 7.1% of UMG stock “through an affiliated entity”. Which was lovely.

But what about that other 2.9%? What the hell was going to happen to that? Gift it to all the legacy artists whose increasingly valuable catalogue has helped fuel all this renewed investor interest in UMG, despite many of those legacy artists being stuck in shitty old deals that pay rubbish royalties?

Fuck no. Ackman has had a good rummage around the back of his sofa and found another $1.149 billion allowing him – or, specifically, another entity known by the snappy name of PS VII Master LP – to buy up the remaining shares, meaning the wider Pershing Square empire is back where it intended to be in June, owning a tenth of the Universal music company.

“Vivendi is pleased to announce that Pershing Square has committed to acquire an additional 2.9% of the UMG capital for a price of $1.149 billion based on an enterprise value of €35 billion for 100% of UMG’s share capital”, said Universal’s current owner yesterday. “In line with what was communicated on 10 Aug 2021 and considering the 7.1% already acquired, Pershing Square will now own 10% of the UMG share capital”.

“Pershing Square Holdings today announced that PS VII Master LP – an affiliated co-investment vehicle – has notified Vivendi SE that it intends to exercise its option to acquire 52,769,098 ordinary shares of Universal Music Group, representing 2.9% of the company, for approximately $21.78 per share (or €18.40 per share at today’s exchange rate)”, bounced back Ackman’s company.