Universal Music set for takeover by Bill Ackman’s Pershing Square

Activist investor Pershing Square mentioned Tuesday it’s planning to purchase Universal Music Group in a money and inventory deal value about 55.8 billion euros ($64.4 billion).

Under the phrases of the proposal, shareholders would obtain a complete of 9.4 billion euros ($10.85 billion) in money and 0.77 shares of recent inventory for every share of UMG held. That quantities to a complete deal worth of 30.4 euros per share, a 78% premium to UMG’s closing share worth on April 2, Pershing mentioned in a Tuesday assertion.

UMG shares had been final buying and selling 11% greater, having fallen 23% up to now this yr.

“Since UMG’s listing, Sir Lucian Grainge and the company’s management have done an excellent job nurturing and continuing to build a world-class artist roster and generating strong business performance,” mentioned Pershing Square CEO Bill Ackman within the Tuesday assertion.

“However, UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business and importantly, all of them can be addressed with this transaction.”

I’ve highlighted a number of components behind UMG’s underperformance, together with uncertainty surrounding Bollore Group’s 18% stake within the firm, the postponement of its US itemizing, and “suboptimal” shareholder communications and engagement.

UMG will type a newly merged firm with Pershing Square and listing on the New York Stock Exchange, in keeping with the phrases of the transaction, which is predicted to shut by the top of the yr.

Pershing proposed a board refresh, calling for Michael Ovitz, “one of the most recognized global entertainment executives,” to be named as UMG chairman. The proposals would see a further two Pershing Square associates be a part of UMG’s board.

The deal can be topic to a brand new employment contract and compensation association for UMG CEO Lucian Grainge.

UMG was spun out of French media group Vivendi, with controlling shareholder Vincent Bollore retaining a stake value round 5.9 billion euros at the moment. The firm behind platinum-selling artists, together with Lady Gaga and Taylor Swift, was listed on the Euronext Amsterdam inventory alternate in 2021 with an preliminary valuation of 46 billion euros.

Vivendi and Bollore‘s inventory traded up 11% and 6.3%, respectively, on Tuesday.

Billionaire Ackman has advocated for UMG, the world’s largest music firm, to shift its primary listing to the USarguing that the inventory trades at a big low cost to its intrinsic worth with restricted liquidity.

CNBC has already reached out to Bollore and UMG for remark. Vivendi declined to touch upon the information.