William Ackman’s Pershing Square Acquires 7.1% of Universal Music Group — With One Month to Increase the Stake to 10%

Billionaire hedge-fund manager William Ackman has officially acquired over seven percent of Vivendi’s Universal Music Group via his Pershing Square Holdings (LON: PSH) investment company, with an option to up the stake to 10 percent during the next month. 

Ackman’s interest in owning a piece of Universal Music Group – which reported a 38 percent year-over-year revenue boost through 2021’s first half – came to light in early June. The 55-year-old originally intended to purchase 10 percent of the Big Three record label via his special-purpose acquisition company, Pershing Square Tontine Holdings (NYSE: PSTH), and it appeared for a time that the deal would close.

However, the proposed investment fell through towards July’s end, with the Pershing Square Capital Management founder Ackman citing “issues raised by the SEC with several elements of the proposed transaction” as one of the development’s chief causes. Despite Ackman’s clear-cut praise of Universal Music’s business model and future, it also bears mentioning that PSTH investors appeared wary of the UMG deal for multiple reasons. During the last six months, the SPAC’s stock price has dipped by nearly 33 percent, with a current per-share price of $20.21.

Now, as initially mentioned, William Ackman and London-based Pershing Square Holdings are set to acquire one-tenth of the stock market-bound Universal Music Group after all, Vivendi announced in a formal release this afternoon.

According to the French conglomerate’s concise release, Pershing Square (and Ackman-managed “affiliates”) today bought 7.1 percent of Universal Music Group for $2.8 billion, at an enterprise valuation (including existing debt) of €35 billion ($41.02 billion at the present exchange rate) for the entirety of the leading record label. The deal specifically encompasses 128,555,017 ordinary UMG shares priced at $21.78 apiece, with Pershing Square’s “cash consideration” totaling $2.5 billion or so.

The buyers have the right to increase their UMG stake to an even 10 percent (at the same price) by Thursday, September 9th, and Pershing Square higher-ups intend to do so, per Vivendi.  

As noted, Universal Music Group is scheduled to arrive on the Euronext Amsterdam on Tuesday, September 21st, with 60 percent of the company becoming available to public investors. Pershing Square will own another tenth, assuming that the transaction involving the remainder of the stake closes, while Chinese conglomerate Tencent currently owns 20 percent of the business. Vivendi expects to retain the remaining 10 percent interest in UMG.

Reports recently revealed that Universal Music Group had launched a formal investigation following toxic-workplace allegations made by current and former employees at its Australian division, and UMG late last month inked a high-profile licensing deal with TikTok rival Lomotif.