Universal Music stock soars as Bill Ackman plans $64 billion acquisition and US listing

Bill Ackman’s Pershing Square Capital Management has projected a monolithic cash-and-stock acquisition of Universal Music Group (UMG), the originative location of Taylor Swift, Drake, and Bad Bunny.

UMG banal soared 13% connected Tuesday pursuing the announcement.

The deal, valued astatine astir $64 billion, would merge UMG with Pershing Square SPARC Holdings, an acquisition vehicle. The determination would make "New UMG," an SEC-registered corp successful Nevada that would beryllium listed connected the New York Stock Exchange (NYSE) and study nether US GAAP standards.

Pershing is Universal's fourth-largest shareholder with a 4.74% stake.

In a missive to the UMG board, Ackman argued that the company's existent valuation does not bespeak its success. "While the concern show has been strong, UMG's stock terms has languished," the Pershing Square CEO said, referring to the company's superior listing connected the Euronext Amsterdam.

By moving UMG to the NYSE, the billionaire capitalist aims to marque the euphony statement eligible for large US indexes, specified arsenic the S&P 500 (^GSPC). Such a determination would unit monolithic concern funds to bargain the stock, theoretically driving up its value.

To enactment his case, Ackman noted that contempt Universal's robust show — with revenues up 60% since 2021 — the banal has dropped 23% successful the aforesaid period. He described the banal arsenic "dramatically underperforming," arguing that the slump is owed to method factors and marketplace positioning, not the euphony concern itself.

Among these factors, Ackman specifically cited "the postponement of UMG's US listing" and "uncertainty" regarding the 18% involvement held by Bolloré Group, a French concern conglomerate specializing successful proscription and logistics. However, helium maintains that specified issues tin beryllium resolved done this circumstantial merger transaction.

Under the presumption of the proposal, shareholders would person 5.05 euros per stock successful currency — a full payout of 9.4 cardinal euros — on with 0.77 shares of "New UMG" for each stock they presently hold. Pershing Square estimates the full bundle is worthy astir 30.40 euros per share, representing a 78% premium implicit the stock's April 2 closing price.

To assistance money the deal, Pershing Square volition lend 2.5 cardinal euros, portion different 1.5 cardinal euros volition travel from the merchantability of UMG’s involvement successful Spotify (SPOT). Notably, UMG artists are expected to person 750 cardinal euros from that Spotify sale, a determination Ackman calls portion of an "artist-centric model."