Late last week, Vivendi’s plan to sell 70% of Universal Music Group seemed easy enough.
The French company planned and plans to spin off 60% of UMG to the Amsterdam Stock Exchange in September (more precisely on September 21st).
In addition, Vivendi was to sell 10% of UMG in a $ 4 billion transaction to US-based Pershing Square Tontine Holdings (PSTH).
That changed today when Ackman announced that his SPAC had canceled its acquisition and signed its share purchase agreement to privately held Pershing Square Holdings Ltd.
But that’s not the end of the story.
According to a Vivendi statement on Bill Ackmans Switcheroo released today (July 19): “The equity stake was eventually acquired [by Pershing Square] UMG will now contain between 5 and 10%. If it were less than 10%, Vivendi still intends to sell the shortfall to other investors before 60% of UMG’s share capital is distributed to Vivendi’s shareholders on September 21, 2021. “
Oh yeah – it’s getting complicated.
Just in case you didn’t take it from Vivendi’s testimony: Despite a share agreement to buy 10% of UMG, it turns out that Pershing Square Holdings Ltd. may not do so now and music companies will instead take over a smaller portion of the major (roughly between 5 and 10%).
In this case Vivendi is in a race to sell the difference to a new, additional buyer. (For example, if Pershing buys 6% of UMG, Vivendi will be busy whipping 4% of UMG to potential buyers and closing a deal before September 21st.)
Should Vivendi successfully sell the 70% of UMG by September 21 (i.e. 60% in the Amsterdam listing and another 10% to Pershing / Pershing plus one additional applicant), this would mean that the French company would have around 90% of Universal in the last 18 months.
Vivendi initially sold 10% of UMG to a consortium led by China’s Tencent in the first quarter of 2020, before selling another 10% to the same consortium in the first quarter of this year.
Each of these deals cost the Tencent-led consortium € 3 billion ($ 3.5 billion at current exchange rates).
Daniel Kerven, Head of European Media and Internet Equity Research at JP Morgan Cazenove, suggested in February that his company should now propose “a blue sky valuation of 100 billion euros” for the Universal Music Group.
Bill Ackman today justified PSTH’s decision to abandon the UMG 10% takeover and wrote: “Our share price has fallen 18% since the transaction was announced on June 4th. While we believe that our shareholders recognize UMG’s exceptional qualities, including its attractive growth traits, business quality and outstanding management team, we have underestimated the reaction of some of our shareholders to the complexity and structure of the transaction.
“We also underestimated the potential impact of the transaction on investors who cannot hold overseas securities, put margins on their shares, or have call options on our shares.”Music business worldwide