Image: Billie Eilish. Source: Universal Music Group
Billionaire investor Bill Ackman will buy up to 10% of Vivendi’s Universal Music Group (UMG) through his main hedge fund instead of a special purpose acquisition company (SPAC) after severe pushback from regulators and investors regarding the deal structure.
Under the transaction announced last month, French media giant Vivendi SE had agreed to sell 10% of Universal Music Group — which is home to Taylor Swift, Drake and Billie Eilish — to Ackman’s SPAC, Pershing Square Tontine Holdings Ltd (NYSE: PSTH ), for $4 billion.
The deal — which valued the music company at more than $42 billion — was expected to close by September and would be the biggest SPAC transaction to date.
In an update to shareholders on Monday, Ackman said his Pershing Square Holdings hedge fund will be replacing the SPAC as the investor in Universal Music.
He went on to write that the U.S. Securities and Exchange Commission (SEC) raised issues with several aspects of the deal but did not disclose what those concerns were. The SEC has stepped up its scrutiny in recent months of SPACs across the board following a dramatic increase in their use.
During an interview with CNBC, Ackman said, "The SEC raised a deal killer. They said that, in their view, the transaction did not meet the New York Stock Exchange SPAC rules and what that meant was what I would call a dagger in the heart of the transaction.”
Investors also questioned the transaction, said Ackman, who noted that PSTH shares fell 18% since the plan was announced on June 4.
“We underestimated the reaction that some of our shareholders would have to the transaction’s complexity and structure. We also underestimated the transaction’s potential impact on investors who are unable to hold foreign securities, who margin their shares or who own call options on our stock,” he said.
In a separate statement on Monday, Vivendi said that Pershing Square Holdings' investment would likely amount to 5% to 10% of Universal’s capital, and that Vivendi would open up to other investors to make up any shortfall if it were less than 10%.
The transaction comes ahead of Vivendi’s plans to spin off UMG via a listing on Euronext Amsterdam in September.
Despite dropping the deal, Ackman insisted that Vivendi was not being “left at the altar” and that Pershing Square Holdings will become a long-term shareholder after UMG’s public listing.
PSTH now plans to pursue a “conventional” SPAC merger and has 18 months to close a new transaction, unless shareholders vote to allow an extension.
“While we are disappointed with this outcome, we continue to believe that the unique scale and favorable structure of PSTH will enable us to find a transaction that meets our standards for business quality, durable growth and a fair price,” Ackman said.
Source: Equities News