Pershing Square put forward a $64bn takeover proposal for Universal Music Group on Tuesday, April 7. It is the latest turn in Bill Ackman’s nearly five-year pursuit of the label.
The cash-and-shares offer comes through Pershing’s acquisition vehicle and values UMG at about 30.40 euros ($35) a share. That is a 78 percent premium to the last close of 17.10 euros ($20), and it puts the whole deal at 55.75 billion euros ($64.31bn). Universal declined a request for comment from Reuters.
UMG shares in Amsterdam rose 13 percent on the day. Bollore Group climbed 5 percent and Vivendi more than 10 percent.
How the deal would work
Under the proposal, Pershing’s SPARC Holdings would merge with UMG, and the combined company would become a Nevada corporation listed on the New York Stock Exchange. The listing would move from Amsterdam. Ackman has argued for years that a New York listing would lift the share price and liquidity, and the move would open the stock to more investors, index funds among them.
Ackman’s letter to the board was mixed in tone. It praised current management, led by chairman and chief executive Lucian Grainge, but criticised the company’s “underutilized balance sheet” and its handling of a 2.7 billion euro ($3.1bn) investment in Spotify Technology. After a deal, Ackman said, Grainge should stay on as CEO.
He said he and former Hollywood super-agent Michael Ovitz had dinner with Grainge “a couple of weeks ago” to talk over the idea. “Lucian encouraged us to send it in,” Ackman said. He proposed new directors, with Ovitz, who steered the careers of Madonna and Michael Jackson, as board chair. Two Pershing representatives would also get seats; Ackman did not say whether he would be one of them.
The shareholders who decide
Nothing happens without UMG’s biggest holders. Bollore Group owns 18.5 percent and Vivendi 13.4 percent, and China’s Tencent is also a significant shareholder. The family of French billionaire Vincent Bollore controls 80 percent of the voting rights.
Pershing itself holds 4.7 percent, making it the fourth-biggest shareholder. It bought a 10 percent stake from Vivendi ahead of UMG’s 2021 Amsterdam IPO, and Ackman sat on the board until last year.
His first approach came in 2021, through Pershing Square Tontine Holdings, a shell corporation built to take a private company public. He shelved that complex deal after heavy US regulatory scrutiny. Investors and industry analysts told Al Jazeera this offer is far friendlier than the forceful activism that made Ackman’s name.
A lagging stock
Music revenues keep growing, yet UMG’s shares have lost almost a third of their value since the IPO. Wells Fargo analysts noted that fears of AI disruption have weighed on the stock, that UMG’s share of the music market has been sliding and that streaming growth is slowing. In March, UMG delayed its plans for a US listing.
UMG, Sony and Warner Music are all scrambling as Spotify, Amazon, Apple and Deezer take a bigger share, and as AI brings copyright disputes and song-generating tools. One survey last year found that 97 percent of listeners could tell AI-generated songs from human-composed ones.
