William Ackman SPAC Closes In on $40 Billion Universal Music Group Deal — Sources

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Universal Music Group headquarters in Santa Monica, CA.

Last month, we reported on rumblings of a possible 10% divestiture by Universal Music Group. Now, that deal appears to be a tad bigger than we initially thought.

The mysterious ‘American investor’ we pointed to back in May now looks to be hedge fund billionaire William Ackman. According to multiple reports and sources, Ackman appears to be orchestrating a merger of Universal Music Group via his SPAC, Pershing Square Tontine Holdings (PTSH). The deal would value UMG north of $40 billion (€33 billion at current exchange rates), according to very rough (and potentially conservative) estimates.

The SPAC — or special purpose acquisition company — is controlled by Ackman and would be used to snap up UMG in one of the largest deals of its kind. Both Reuters and the Wall Street Journal named Pershing Square as the likely buyer, though Pershing itself has declined to offer any comment. The Wall Street Journal has pegged the deal’s ‘enterprise value,’ which includes existing debt, at $42 billion.

Universal Music Group parent Vivendi has also declined to comment, but earlier pointed to a pending negotiation prior to its broader IPO involving 60% of the mega-label. “Prior to the distribution of 60% of the UMG shares to Vivendi shareholders, the group is analyzing the opportunity of selling 10% of UMG shares to an American investor or initiating a public offering of at least 5% and up to 10% of UMG shares,” the company disclosed last month.

Technically, this wouldn’t be an acquisition, but rather a crafty market merger. The SPAC vehicle functions by first raising a massive tranche of investor funds, then ‘merging’ with a private company at a later point. That blank check structure offers an alternative to a traditional public offering, and is currently exploding in popularity on Wall Street.

At this stage, however, it’s unclear what exact ownership percentages are being discussed, and how this might impact Vivendi’s eventual plans to IPO its crown jewel property on the Euronext Amsterdam later this year. Currently, UMG accounts for more than half of Vivendi’s total revenue, a massive shift propelled by the boom in music streaming.

Several weeks ago, Pershing reportedly told investors that it was nearing a purchase in the $40 billion valuation range, without naming Universal Music Group. Shares of PTSH dropped precipitously in after-market trading on Thursday, before sharply rebounding.