Bill Ackman’s Pershing Square hedge fund offers cash and shares for UMG, aiming to list the merged Taylor Swift and Lady Gaga label in New York
PARIS: American hedge fund Pershing Square has launched a takeover bid for Universal Music Group. The activist fund led by Bill Ackman believes the music giant is significantly undervalued by public markets.
Its offer to UMG shareholders includes EUR 9.4 billion in cash, equating to EUR 5.05 per share. The proposal also includes 0.77 shares in a new merged entity for each existing UMG share.
The total deal is worth approximately EUR 55 billion according to calculations. The combined company would boast a roster of top artists including Taylor Swift, The Weeknd and Lady Gaga.
Pershing Square plans to merge UMG with its acquisition vehicle, Pershing Square SPARC Holdings. The new entity would subsequently be listed on the New York Stock Exchange.
The hedge fund aims to finalise the transaction by the end of 2026. “UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business,” Ackman stated.
The company cited several factors depressing the share price. These include uncertainty over French conglomerate Bollore’s 18% stake and the delayed US stock market listing.
Pershing Square also highlighted the “underutilisation of UMG’s balance sheet” as a concern. It outlined financial strategies for the merged company in a letter to Universal’s board.
The new entity would aim to increase its dividend payouts by 2% annually. It would also maintain borrowing at 2.5 times its operating profit, or EBITDA.
“All free cash flow after required investments in the business will be used for share repurchases,” the letter added. News of the offer prompted a sharp rise in Universal’s share price.
The stock was up 11.7% on the Amsterdam exchange following the announcement. It was trading at EUR 19.10 around 0915 GMT.
