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Vivendi sells 7.1% of Universal Music to investor behind failed SPAC deal

By | Published on Wednesday 11 August 2021

Universal Music

Vivendi has sold 7.1% of the Universal Music Group to Pershing Square Holdings and its affiliates, though the hedge fund manager that heads up that investment fund, Bill Ackman, could as yet buy another 2.9% of the music major through other entities.

The French conglom is preparing to spin off Universal Music, of course, so to list the music business on the Dutch stock exchange next month. 60% of the shares in the standalone Universal Music will then be distributed to Vivendi’s current shareholders. 20% will be controlled by a consortium led by Chinese web giant Tencent, in theory leaving Vivendi itself with the remaining 20%.

However, Vivendi announced in May that it planned to sell half of that 20% shareholding prior to the stock market listing. The buyer of that 10% of UMG was then revealed to be a US-based special purpose acquisition vehicle led by Ackman, which goes by the name Pershing Square Tontine Holdings.

Special purpose acquisition vehicles – aka SPACs or blank cheque companies – are entities that list on a stock exchange with no active operations, raising money on the investment markets to fund future acquisitions.

Usually SPACs, once listed and funded, buy an existing privately held company outright, basically providing that company with a back door stock market listing. Which made the plan to use a SPAC’s monies to instead buy 10% of the soon to be publicly listed Universal Music somewhat unusual.

Sufficiently unusual, in fact, that the deal between Vivendi and Pershing Square Tontine Holdings fell through. A lukewarm response to the Universal share purchase from the SPAC’s investors, coupled with concerns raised about the deal by US regulator the Securities And Exchange Commission, persuaded Ackman to have a rethink.

However, when announcing last month that the deal between Vivendi and Pershing Square Tontine Holdings was no longer going ahead, Ackman said that he still intended to buy 5-10% of Universal’s shares via his other investment funds. And that has now happened.

Ackman-led hedge fund Pershing Square Holdings (not to be confused with Pershing Square Tontine Holdings, obviously) announced yesterday that “Pershing Square Holdings Ltd, Pershing Square LP and Pershing Square International Ltd – through an affiliated entity – have acquired 128,555,017 ordinary shares of Universal Music Group, representing 7.1% of the company, from Vivendi SE for approximately $21.78 per share (or 18.58 euros per share at today’s exchange rate)”.

When the SPAC deal fell through last month, Vivendi confirmed that, if any new deal with Ackman didn’t result in the offloading of the full 10% of Universal Music it had previously pledged to sell pre stock market listing, then it would look for another buyer of whatever shares were left. That could still happen, although – Vivendi said yesterday – Ackman may as yet buy the remaining 2.9%.

Vivendi’s statement read: “Vivendi sold today 7.1% of UMG’s share capital to Pershing Square Holdings and affiliates, which are managed by Mr William Ackman, for a price of $2.8 billion based on an enterprise value of 35 billion euros for 100% of UMG’s share capital”.

“Mr Ackman has the right to acquire, by September 9, 2021, up to an additional 2.9% of UMG’s share capital through funds which he manages or in which he holds the majority of economic interest, based on the same valuation”, it then added, before concluding: “Vivendi is very satisfied with the arrival at UMG of Mr Ackman, a major American investor, providing once again evidence of the music company’s global success and attractiveness”.

With Vivendi currently planning to list the standalone UMG on the Dutch stock exchange on 21 Sep, that won’t leave much time to find an alternative buyer for the other 2.9% of the company if Ackman doesn’t complete a second share sale by 9 Sep. But I’m sure it will all be fine. If not, maybe we could all have a whip round and help them out. I know I’ve got 30 euros that have been sitting in a drawer unspendable during COVID, and I’m happy to contribute those to get things going.