New York-based Pershing Square Tontine Holdings (PSTH) confirmed this morning (June 4) that it is in talks to acquire 10% of Universal Music Group for approximately $ 4 billion.
PSTH, which is listed on the New York Stock Exchange, is a special purpose acquisitions company (SPAC) affiliated with Pershing Square Holdings, and is led by billionaire CEO Bill Ackman.
Pershing Square and Vivendi confirm that the proposed transaction would represent an enterprise value to UMG of 35 billion euros (42.4 billion dollars at the current exchange rate).
PSTH said the deal was “subject to the completion of mutually satisfactory transaction documentation, but is not subject to additional due diligence.”
“Universal Music Group is one of the largest companies in the world,” said Bill Ackman, CEO of PSTH. “Led by Sir Lucian Grainge, it has one of the most outstanding management teams I have ever met.
“Importantly, UMG meets all of our acquisition criteria and investment principles, as it is the world’s leading music company, with royalties on the growing global demand for music. We are delighted to be working with Vivendi on this iconic transaction and look forward to its completion. “
“Led by Sir Lucian Grainge, Universal Music Group has one of the most prominent management teams I have ever met.”
Bill Ackman, Pershing Square
Unlike most SPAC, PSTH and UMG business combinations they will not be combined into one company after the transaction.
Later this year, after Vivendi completes its previously announced listing of UMG on Euronext Amsterdam, PSTH plans to distribute 10% of the acquired UMG shares to its shareholders.
About 60% of UMG wants to separate in Amsterdam. If the PSTH transaction goes through, that would leave the remaining 40% of UMG divided as follows: 10% to PSTH; 10% to Vivendi; 20% to a consortium led by Tencent Holdings.
PSTH told its shareholders today that UMG offers the following “strategic attributes and competitive advantages”:
- Industry’s number one market share in a stable competitive environment
- Iconic world-class management team
- Massive market and fully addressable growth. Everybody loves music!
- Global consumer adoption of streaming will lead to many years of high growth
- Irreplaceable proprietary IP and must-have content
- Predictable and recurring income streams requiring minimal capital despite high growth
- Large fixed cost expense base allowing long-term margin expansion
- Minimum financial leverage (<1x Net Debt / EBITDA)
- UMG wants to be the only great company of uncontrolled and pure music content
- UMG wants to have an independent and high-quality board of directors
PSTH expects to fund the transaction with cash held in its NYSE IPO trust account ($ 4 billion plus interest), and approximately $ 1.6 billion in additional funds from the exercise of its Forward Purchase Agreements with Pershing Square. Funds and affiliates. .
Approximately $ 4.1 billion of this proceeds will be used to acquire UMG shares and pay transaction costs, with the balance of $ 1.5 billion being held by PSTH Remainco.Music business around the world