Author：Wall Street CN
Bill Ackman’s Pershing Square Capital has made a takeover bid for Universal Music Group, the world’s largest record company, for approximately €55 billion (over $63 billion), and plans to move its stock listing from Amsterdam to the New York Stock Exchange.
According to a Wall Street Journal report on Tuesday,The deal is expected to be completed by the end of this year. The specific plan is for Universal Music to merge with Pershing Square Sparc Holdings, the SEC-registered acquisition vehicle of Pershing Square. The merged company will be registered in Nevada.
In a statement, Ackerman said, "Universal Music's stock price has been depressed for a long time due to a series of issues unrelated to its music business performance, and these issues can be resolved through this transaction."
Universal Music's stock price has fallen by more than 20% in the past six months, with market concerns about artificial intelligence potentially squeezing music industry profits being the main drag. If this acquisition offer goes through, it will be one of the largest mergers and acquisitions in the entertainment industry in recent years, and will directly change the capital structure and listing landscape of this music giant, which owns top artists such as Taylor Swift and Kendrick Lamar.
Transaction structure: cash and stock, priced at €30.40 per share.
According to Pershing Square's statement, Universal Music shareholders will receive €5.05 in cash and 0.77 new shares for each Universal Music share they hold, totaling approximately €9.4 billion. This equates to a price of approximately €30.40 per share (about US$35.09), valuing the entire Universal Music stake at approximately €55 billion.
Pershing Square has held shares in Universal Music since 2021. Ackman previously served on Universal Music's board of directors until his resignation last May. According to the Wall Street Journal, Ackman was a key figure in pushing for the company to go public in the U.S. during his tenure.
Low stock price and valuation discount: Ackman lists three major problems
In its statement, Pershing Square named three factors that dragged down Universal Music's valuation.
First, the company lacks publicly disclosed capital allocation plans; second, the market has failed to fully reflect the value of Universal Music's stake in the music streaming platform Spotify; and third, the uncertain future of the 18% stake held by the Bolloré Group, owned by French billionaire Vincent Bolloré's family, has raised concerns in the market about the company's controlling structure.
In 2021, the Bolloré Group spun off Universal Music Group from its French media group Vivendi. Currently, Tencent is Universal Music's second-largest shareholder, holding 11.4% of the shares.
As of press time, neither Universal Music nor the Bolloré family spokespeople had responded to the aforementioned acquisition offer.
Relocating to New York: A key step towards higher valuation
One of the core reasons for this transaction is to relocate Universal Music's listing from Europe to the US capital market. Universal Music listed on Euronext Amsterdam in September 2021, with its operational headquarters located in Santa Monica, California, USA, and its registered office in Hilversum, Netherlands.
Ackerman believes that the liquidity and valuation systems in the European market have failed to fully reflect Universal Music's intrinsic value, and that moving to the New York Stock Exchange will help attract a wider range of American institutional investors and drive a valuation reassessment. The merged company will be incorporated in Nevada.
Last year, Universal Music announced plans to issue a stake in Pershing Square in the United States, but this full merger plan is clearly a step further in terms of scale and ambition.
