NEW YORK--Billionaire investor Bill Ackman's Pershing Square proposed a takeover of Universal Music Group on Tuesday in a $64 billion deal, the latest twist in his nearly five-year quest for the music label giant.
Pershing Square is proposing a cash-and-shares offer through its acquisition vehicle that values Universal Music at around 30.40 euros per share - a 78% premium to the last closing price of 17.10 euros - making the deal worth 55.75 billion euros ($64.31 billion), according to Reuters calculations.
Universal Music Group - 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 issued a statement, acknowledging it had received the unsolicited and nonbinding proposal from Pershing Square, which the directors will review - together with their advisers."The Board of Directors has complete confidence in UMG’s strategy and the leadership of Sir Lucian Grainge and the company's management team," Universal said in a statement, adding it would have no further comment on the proposal until the board of directors completes its review.
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, Universal Music Group's share price has lagged, something Ackman is pledging to fix with this proposed deal.Laying out the financial specifics in a conference call on Tuesday, Ackman said the transaction will not hamper the company from continuing to be the dominant player in the industry but that Universal has "never really graduated" from being operated like a private company.
Ackman's letter to Universal Music Group's board carried a mixed tone, at times complimentary of current management led by Grainge, who is chairman and chief executive, and critical of the company's "underutilized balance sheet" and handling of its 2.7 billion-euro investment in Spotify Technology.
Fears of AI disrupting the music industry have played a role in UMG's lackluster 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 U.S. listing.
Nonetheless, Ackman will need the support of UMG's top shareholders Bollore Group, which holds an 18.5% stake, and Vivendi, which owns 13.4%, to push through any transaction. China's Tencent is a significant shareholder. French billionaire Vincent Bollore's family controls 80% of UMG's voting rights.
