Confirmed: 10% of Common set to be bought to Pershing Sq. SPAC in $4bn ‘iconic transaction’
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.
NYSE-listed PSTH is a Pershing Square Holdings-affiliated special purpose vehicle (SPAC) and is led by billionaire CEO Bill Ackman.
Pershing Square and Vivendi both confirm that the proposed transaction would represent an enterprise value for UMG of 35 billion euros (42.4 billion US dollars at current exchange rates).
PSTH said the transaction is “subject to the completion of mutually satisfactory transaction documentation but not additional due diligence”.
“Universal Music Group is one of the largest companies in the world,” said Bill Ackman, CEO of PSTH. “Under the direction of Sir Lucian Grainge, it has one of the most outstanding management teams I have ever come across.
“It is important that UMG meet all of our acquisition criteria and investment principles as it is the world’s leading music company, with a royalty to meet the growing global demand for music. We are excited to partner with Vivendi on this iconic transaction and look forward to its completion. “
“Under the direction of Sir Lucian Grainge, the Universal Music Group has one of the most outstanding management teams I have ever met.”
Bill Ackman, Pershing Square
Unlike most of SPAC’s business combinations, PSTH and UMG will not merge into one company after the transaction.
Later this year, after Vivendi completed UMG’s previously announced listing on Euronext Amsterdam, PSTH plans to distribute the acquired 10% of UMG shares to its shareholders.
Around 60% of the UMG are outsourced in Amsterdam. Should the PSTH transaction be carried out, the remaining 40% of the UMG would be divided as follows: 10% on PSTH; 10% according to Vivendi; 20% to a consortium led by Tencent Holdings.
PSTH announced to its shareholders today that UMG offers the following “strategic attributes and competitive advantages”:
- Industry market share number one in a stable competitive environment
- Iconic world class management team
- Massive and growing addressable total market. Everyone loves music!
- Worldwide consumer acceptance of streaming will result in high growth for many years to come
- Irreplaceable property rights and indispensable content
- Predictable, recurring revenue streams that require minimal capital despite high growth
- Substantial fixed cost base that enables long-term margin expansion
- Minimal financial leverage (<1x net debt / EBITDA)
- UMG will be the only uncontrolled, pure music content company
- UMG will have an independent, high-quality board
PSTH expects to close the transaction with cash in its escrow from its IPO on the NYSE ($ 4 billion).
Approximately $ 4.1 billion of that proceeds will be used to purchase the UMG shares and pay the transaction costs, with the remainder of $ 1.5 billion being withheld by PSTH Remainco.Music business worldwide