Done deal: Pershing Square SPAC is buying 10% of Universal Music Group for $4bn

REUTERS/Mike Blake/Alamy
Bill Ackman, CEO of Pershing Square Capital, speaks at the Wall Street Journal Digital Conference in Laguna Beach, California, U.S., October 17, 2017

Pershing Square Tontine Holdings (PSTH), a US-based special purpose acquisition company (SPAC), is officially buying 10% of Universal Music Group.

PSTH confirmed earlier today (June 20) that it had entered into a definitive agreement with UMG’s majority owner, Vivendi, to acquire 10% of outstanding ordinary shares in UMG for approximately $4 billion.

Later this year, after Vivendi completes the previously announced listing of UMG on Euronext Amsterdam, shares representing 10% of the music company will be distributed to PSTH shareholders.

Vivendi has previously announced that UMG’s listing in Amsterdam – which will see 60% of the company floated on the stock exchange – will be completed by September 27 “at the latest”.

Following the Amsterdam listing and PSTH share distribution, UMG will be owned 10% by Vivendi, 10% by PSTH, 60% as traded on the Amsterdam Euronext, and 20% by a consortium led by Tencent Holdings.

Today’s news reflects the conclusion of discussions between PSTH and Vivendi over the deal, as initially announced on June 4.

PSTH reiterated to its investors today that Universal had “strategic attributes and competitive advantages” including “predictable, recurring revenue streams that require minimal capital despite high growth”.

It added that UMG offers “significant fixed-cost expense base allowing for long-term margin expansion”.

PSTH also told its shareholders: “During the course of our negotiations with Vivendi, it became clear that various tax, legal and other strategic considerations precluded Vivendi from entering into a “traditional” de-SPAC merger transaction, and from selling more than 10% of UMG.

“Even with the additional complexity, time, legal, and other costs that these constraints created, we were convinced that the opportunity to acquire such an extraordinary business was the best option for our shareholders.

“Fundamental to that decision was the fact that the UMG transaction on its own provides all of the same benefits and protections to our shareholders that they would have received in a more traditionally structured de-SPAC merger and share distribution.”

Following the UMG distribution, PSTH shareholders will continue to own shares in PSTH , which will continue to exist, with approximately $1.5 billion in cash and access to an additional $1.4 billion of cash through forward purchase agreements.Music Business Worldwide