Bill Ackman wants to take the world’s largest music company private-equity style onto Wall Street. His hedge fund, Pershing Square Capital, announced a $64 billion pitch on Tuesday to buy Universal Music Group, the label whose roster includes Taylor Swift, Bad Bunny, Bob Dylan and the Beatles.
Under the plan, UMG would be merged with Pershing Square SPARC Holdings, Ackman’s own vehicle. The joint entity would list on the New York Stock Exchange by the end of the year. Pershing already controls 4.6% of UMG shares.
Ackman’s case
In a statement, Ackman praised the people running the label. “The company’s management have done an excellent job nurturing and continuing to build a world-class artist roster and generating strong business performance,” he said. Then came the but: “UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business, and importantly, all of them can be addressed with this transaction.”
Pershing’s announcement named those issues. It pointed to the postponed listing on a US exchange, a balance sheet it says is underused, and poor investor relations and communications. Together, it argued, they explain UMG’s “underperformance.”
Chasing Buffett
Fortune framed the offer as the latest step in Ackman’s effort to turn Pershing into a modern-day Berkshire Hathaway. He calls himself a “Buffett devotee.” The prize is what Warren Buffett’s playbook treats as essential: permanent capital.
The logic is simple. Investors can pull money out of a hedge fund every quarter or every year, so managers must hold cash and risk being forced to sell. In a listed closed-end fund, capital cannot be directly withdrawn. Shareholders who want out have to sell on the open market.
The offer arrived weeks after Pershing filed to list on the NYSE, Ackman’s latest attempt to go public in the US. Fortune put the hedge fund’s market cap at $11.27 billion, with $28 billion in assets under management, and Ackman’s personal worth at $8.13 billion.
The stock reacts
UMG trades on Euronext Amsterdam. Before the announcement it was down about 22% for the year. On the day it traded at 19.06 euros ($22.06), a gain of about 2 euros ($2.32).
Pershing declined to comment beyond its proposal. UMG did not immediately respond to Fortune’s request for comment.
Sources
Sources
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