Image: Billie Eilish. Source: Universal Music Group
By Mathieu Rosemain and Svea Herbst-Bayliss
Billionaire William Ackman's Pershing Square Tontine Holdings is in talks to buy 10% of Universal Music Group for around $4 billion, the latest investor to join the fray as the label's owner Vivendi's cashes in on its prize asset.
Vivendi, controlled by French billionaire Vincent Bollore, has benefited from growing streaming revenues at the world's biggest music label, which is behind artists such as Billie Eilish, Taylor Swift and Lady Gaga.
It has already sold chunks of Universal Music to a consortium led by Chinese giant Tencent, and plans to list Universal in Amsterdam by September as part of a two step transaction to then distribute 60% of the label to existing investors.
Vivendi said the deal with Ackman's special purpose acquisition company (SPAC) would give Universal an enterprise value of 35 billion euros ($42.4 billion), up from a previous valuation of 33 billion euros.
"Universal Music Group is one of the greatest businesses in the world," said Bill Ackman, CEO of PSTH.
Vivendi shares were down around 0.1% 0816 GMT, after rising in early trading.
SPACs such as Pershing Square Tontine raise money in an initial public offering with the aim of merging with a private company. For the private company, the process is an alternative to listing its shares through an initial public offering (IPO).
In the case of Universal, however, the SPAC's investment will not result in a merger.
Nearly a year ago, in July 2020, Pershing Square raised $4 billion in what was the biggest IPO by a blank-check firm.
"Universal Music is a business that can be valued without speculating about it having a future," said Erik Gordon, a professor of business at the University of Michigan, said of Pershing's investment.
IPO GOING AHEAD
A Vivendi spokesman confirmed on Friday there were no changes to the plans for a Universal IPO by Sept. 27 after the deal with Ackman. The company, which owns 80% of Universal, had already flagged it could sell an additional 10% of the group to an American investor prior to the IPO.
Bringing in Ackman will diminish the stakes held by Vivendi, at the end of the distribution-in-kind, giving Vivendi 10%, Pershing 10%, Bollore 16% and the Tencent-led consortium 20%.
Vivendi shareholders are due to vote on the transaction at a June 22 investor meeting.
The Universal IPO plans deal has raised hackles from activist fund Bluebell, however, which said it penalized minority shareholders as the distribution-in-kind structure was not tax efficient.
Bluebell, which has declined to reveal the size of its stake in Vivendi, has called on France's markets watchdog to examine disclosures around the deal.
Pershing Square Tontine Holding's shares were down nearly 6% at $23.50 a share in after-market trade after news of the potential deal broke.
($1 = 0.8258 euros.)