The hedge fund billionaire Bill Ackman is nearing a deal with Universal Music Group in which his blank-cheque company would acquire a 10 per cent stake in the record label behind artists such as Lady Gaga and Cyndi Lauper.
Universal’s owner Vivendi confirmed on Friday that it was in talks with Pershing Square Tontine Holdings, a special purpose acquisition company that broke records with its $4bn listing last year. The deal would value Universal at more than $40bn.
As part of the unusual plans, Vivendi still aims to distribute other remaining Universal shares to investors through a public listing on the Euronext exchange later this year. The Spac listing is viewed as a proxy to value Universal Music ahead of this public distribution, said people briefed on the situation.
The transaction, a first of its kind for a Spac, would not combine the two companies. Instead, PSTH would distribute Universal shares directly to shareholders after the company’s planned listed on Euronext Amsterdam in the third quarter of 2021.
PSTH intends to exercise its forward purchase agreement bringing the total pot of cash to $5.6bn. Approximately $4.1bn will be used to acquire a stake in Universal with the remaining $1.5bn to be held by the Spac and used for a future transaction.
The dealmaking comes as Vivendi seeks to squeeze money out of Universal Music, its prized asset that has benefited from the revival of the music business, luring investors into the sector.
Ackman fended off competition from the private equity firm Hellman & Friedman, which had offered to buy a 10 per cent stake in Universal at a €30bn valuation, according to a person with direct knowledge of the matter.
Shares in Ackman’s New York Stock Exchange-listed company fell as much as 14 per cent in after-hours trading, as investors reacted negatively to news of the transaction.
Ackman’s Spac is working with his advisers to finalise the terms of the deal, which could take days or weeks to close, said people briefed about the matter.
Last month Vivendi said it was considering selling an additional 10 per cent stake in Universal Music to an unnamed US investor. The French media group, controlled by the billionaire Vincent Bolloré, has previously sold 20 per cent of Universal to China’s Tencent.
Ackman hinted last month that he could be announcing a deal in the next few weeks. The investor said he had been working on the transaction since early November, adding that he was “deeply engaged” with an “iconic, phenomenal, great business”. Ackman said at the time that there was a lot of complexity involved in the deal.
The value of music companies has soared in recent years as audio streaming services such as Spotify resuscitated the ailing business, sending billions of dollars of royalty payments to record labels including Universal. In 2013 SoftBank offered to buy Universal Music for only €6.5bn.
Universal, home to acts including The Beatles, Drake and Taylor Swift, is the world’s largest record label, commanding an almost 30 per cent share of the market, according to Midia Research estimates.
Spacs, which raise money through a public listing and hunt for a private business to take public, have become one of the most talked-about asset classes on Wall Street. But increased regulatory scrutiny and poor performance have damped investor interest, slowing the number of listings and volume of transactions.