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Vivendi finalises $4 billion deal to sell 10% of Universal Music ahead of stock market listing

By | Published on Monday 21 June 2021

Universal Music

Vivendi confirmed yesterday that it has agreed to sell 10% of the Universal Music Group to US-based investment vehicle Pershing Square Tontine Holdings Ltd, ahead of the planned listing of its music division on the Dutch stock exchange later this year. As expected, the deal is worth about $4 billion, therefore valuing Universal Music at about $40 billion.

When UMG becomes a standalone business listed on the Euronext stock exchange in Amsterdam, Vivendi will distribute 60% of the shares in that company to its current shareholders. A consortium led by Tencent will continue to own 20%, and it had originally been expected that Vivendi itself would also retain 20% of the music company.

However, last month Vivendi said that it now planned to sell a further 10% of UMG ahead of the stock market listing, so that it would only directly control 10% of the standalone music firm once listed. Then earlier this month it confirmed that it was in talks with PSTH – and the activist investor and hedge fund manager leading that entity, Bill Ackman – about it buying that 10%.

PSTH is a so called special purpose acquisition company – aka a SPAC or blank cheque company – which are businesses that list on a stock exchange without any active operations with a view to spending monies raised on acquisitions. SPACs usually buy companies outright and, in doing so, turn those companies into publicly listed businesses without a conventional Initial Public Offering. Therefore PSTH’s deal to buy 10% of UMG is slightly unusual.

Explaining how the deal will work, the investment outfit said yesterday: “Later this year, after Vivendi completes the previously announced separation from and listing of UMG on Euronext Amsterdam, the acquired UMG shares will be distributed to PSTH shareholders”.

PSTH will continue to exist after that transaction is complete with “approximately $1.5 billion in cash and access to an additional $1.4 billion”. It will, it added, then seek “a more traditional de-SPAC business combination, and therefore it will not acquire minority share ownership in a company by means of a share purchase transaction – we have already begun to identify that business combination partner”.

Confirming the deal from its side, Vivendi said it was “pleased to announce the signing of an agreement with PSTH … for the sale of 10% of the share capital of Universal Music Group. The closing of this transaction is subject to the continued participation of PSTH shareholders after they are afforded customary redemption rights, and completion of US regulatory processes, and is expected to take place in the coming weeks, and at the latest by 15 Sep 2021”.

“After the 20% equity stake acquired by the consortium led by the Tencent group, the arrival of major American investors provides further evidence of UMG’s global success and attractiveness”, Vivendi added. “As announced, the transaction is based on an enterprise value of 35 billion euros for 100% of UMG’s share capital”.

It is now expected that Universal Music will arrive on the stock exchange in Amsterdam towards the end of September.

This story is discussed on this episode of our Setlist podcast