Universal Music Group saw its shares (AMS: UMG) rise more than 11% on Tuesday, following a proposal from billionaire Bill Ackman to buy the music giant through his investment firm Pershing Square Capital Management.
Pershing Square currently owns a 10% stake in Amsterdam-listed UMG. Despite today’s bump, the stock is down about 15% year to date.
UMG has an extensive music catalogue and is home to major recording artists such as Taylor Swift, Bob Dylan, and Bad Bunny.
What would the deal mean for UMG?
If approved, the deal would offer shareholders €9.4 billion ($10.9 billion) in cash and 0.77 shares in “new UMG” for each share of UMG they currently own.
Overall, this would equal out to €30.40 ($35.11) per share, a 78% premium compared to the closing price on April 2. If all goes well, shares could reach a 92% premium from that date by the end of 2026.
Ackman details all of this in a letter to UMG’s board members, on which he sat until last year.
The proposal would turn UMG into a Nevada corporation and list it on the New York Stock Exchange (NYSE)—something Ackman has pushed for since UMG’s 2021 IPO in the Netherlands.
“While business performance has been strong, UMG’s share price has languished. Since the public listing in September 2021, revenues and Adjusted EBITDA have grown 60% and 70% respectively, while UMG’s share price has declined 23% from its €25.10 closing price on the first day of its Euronext listing.”
How has UMG responded?
So far, the company has not publicly responded to the deal. Fast Company has reached out to UMG for comment and will update this post if we hear back.
In his letter, Ackman details a number of reasons he attributes to UMG shares’ “underperformance,” including postponing a listing on a U.S. stock exchange.
He further points to “uncertainty” around Bolloré Group’s 18% stake in UMG, the lack of a “publicly disclosed capital allocation plan,” and “suboptimal” communication and engagement with shareholders.
Plus, Ackman would like to see UMG sell its €2.7 billion ($3.1 billion) stake in Spotify.
Ackman continued: “Notably, none of the above issues relate to the company’s execution of its music business, and importantly, all of the above issues can be addressed in a merger transaction.”
Stipulations for the deal include a new contract and compensation agreement for CEO Lucian Grange, and a shakeup of the board.
The latter would include making Michael Ovitz, cofounder of the Creative Artists Agency (CAA), the chair, and adding two additional Pershing Square members.
This story is developing…
