Billionaire investor Bill Ackman’s Pershing Square has proposed a takeover of Universal Music Group in a $64bn deal, the latest twist in his nearly five-year quest for the music label giant.
Pershing Square proposed a cash-and-shares offer on Tuesday through its acquisition vehicle that values Universal Music at about 30.40 euros ($35) per share, a 78 percent premium to the last closing price of 17.10 euros ($20), making the deal worth 55.75 billion euros ($64.31bn).
Universal Music Group (UMG) – the company behind international superstars, including Taylor Swift, Billie Eilish and Kendrick Lamar – is expected to move its listing to New York from Amsterdam, paving the way for more investors, including index funds, to own the company and ultimately lead to more robust earnings and a higher valuation.
Universal Music declined a Reuters news agency request for comment.
For Ackman, one of the world’s most voluble investors, who cemented his fame and fortune as an activist investor, forcefully pushing corporate America to adopt changes, this is a far friendlier approach, investors and industry analysts said.
Even as the music industry is flourishing, UMG’s share price has lagged, something Ackman is pledging to fix with this proposed deal.
Ackman’s letter to Universal Music Group’s board carried a mixed tone, at times complimentary of current management, led by chairman and chief executive Lucian Grainge, and critical of the company’s “underutilized balance sheet” and handling of its 2.7 billion euro ($3.1bn) investment in Spotify Technology.
Fears of AI disrupting the music industry have played a role in UMG’s lacklustre performance. Its share of the music market has been sliding, and streaming growth is decelerating, Wells Fargo analysts noted. In March, UMG delayed its plans for a US listing.
Nonetheless, Ackman will need the support of UMG’s top shareholders – Bollore Group, which holds an 18.5 percent stake, and Vivendi, which owns 13.4 percent – to push through any transaction. China’s Tencent is a significant shareholder. French billionaire Vincent Bollore’s family controls 80 percent of UMG’s voting rights.
Ackman first flirted with Universal Music Group in 2021, when his Pershing Square Tontine Holdings, a shell corporation created to take a private company public, zeroed in on its target. But Ackman shelved the complex deal in the wake of heavy US regulatory scrutiny. Instead, Pershing Square became one of UMG’s biggest investors in 2021, and Ackman sat on its board until last year.
Post transaction, Ackman said Grainge should remain Universal Music’s chief executive.
Ackman said he and former Hollywood super-agent Michael Ovitz met with Grainge over dinner “a couple of weeks ago” to discuss the potential merger.
“Lucian encouraged us to send it in,” Ackman said.
Ackman proposed adding new directors, including Ovitz – who shepherded the careers of Madonna and Michael Jackson – who would become the board chair. Additionally, two representatives from Pershing Square would get seats, he said, not saying yet whether he would be one of the directors.
Shares of UMG, which is listed in Amsterdam, were up 13 percent on Tuesday, while Bollore Group climbed 5 percent. Shares in Vivendi were up more than 10 percent.
Pershing bought a 10 percent stake in UMG from Vivendi ahead of its 2021 Amsterdam IPO and has since repeatedly pressed for a New York listing, arguing it would boost UMG’s share price and liquidity.
Pershing currently has a 4.7 percent stake, making it UMG’s fourth-biggest shareholder.
UMG’s shares have lost almost a third of their value since its IPO.
Even as global music revenues grow year after year, UMG and other major labels, like Sony and Warner Music, are scrambling to stay competitive as streaming services from Spotify, Amazon, Apple and Deezer take an ever greater share.
They are now also contending with disruptions brought on by the expansion of AI – from copyright disputes to the advent of song-generating AI tools – that threaten to upend how music is created, consumed and monetised.
One survey last year found that a staggering 97 percent of listeners could distinguish between AI-generated and human-composed songs.
Under Tuesday’s proposal, Pershing’s SPARC Holdings would merge with UMG, and the new entity would become a Nevada corporation listed on the New York Stock Exchange.
