A special purpose acquisition company (SPAC) called Pershing Square Tontine Holdings (PSTH) is set to buy a 10% stake in Universal Music Group (UMG) for just over $4 billion. PSTH is affiliated with Pershing Square Holdings, a company owned by billionaire investor Bill Ackman.
PSTH notes that the deal is “subject to the completion of mutually satisfactory transaction documentation, but is not subject to additional due diligence.” However, Ackman states, “Universal Music Group is one of the greatest businesses in the world. Led by Sir Lucian Grainge, it has one of the most outstanding management teams that I have ever encountered. Importantly, UMG meets all of our acquisition criteria and investment principles as it is the world’s leading music company, with a royalty on the growing global demand for music. We are delighted to work with Vivendi on this iconic transaction, and look forward to its consummation.”
Vivendi is the media conglomerate best known for owning UMG. Both Vivendi and Pershing Square Holdings confirm that they believe that UMG is currently worth an enterprise value of €35 billion, which is $42.4 billion at current exchange rates. UMG is set to go public on Euronext Amsterdam later this year, PSTH plans to also distribute its UMG shares to PSTH shareholders.
PSTH made the $4 billion it needed for the transaction from its IPO on the New York Stock Exchange, as well as an additional $1.6 billion from exercising its Forward Purchase Agreements with Pershing Square Funds.
In their announcement of the deal to shareholders over the weekend, PTSH also mentioned what they believe to be UMG’s “strategic attributes and competitive advantages,” including having the “Number one industry market share in a stable competitive environment,” an “Iconic world-class management team,” a “Massive and growing total addressable market,” a belief that “Global consumer adoption of streaming will generate many years of high growth,” some “Irreplaceable owned IP (intellectual property) and must-have content,” many “Predictable, recurring revenue streams that require minimal capital despite high growth,” a “Significant fixed-cost expense base allowing for long-term margin expansion,” a “Minimal financial leverage (<1x Net Debt / EBITDA),” the fact that “UMG will be the only uncontrolled, pure-play major music content company” and that “UMG will have an independent, high quality board of directors.”