Billionaire investor Bill Ackman has launched a $65-billion bid to purchase Universal Music, or UMG, the label representing some of music’s biggest names including Taylor Swift, Kendrick Lamar and Bad Bunny.
As part of the proposed deal, UMG would merge with Ackman’s investment firm, Pershing Square Capital Management, and the company’s stock listing would be relocated from Amsterdam to the New York Stock Exchange.
Pershing Square already holds more than 4.5% of the music giant’s shares. Ackman said the move to a U.S.-based stock exchange would increase the value of UMG.
“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,” said Ackman in a statement.
The proposed deal includes Universal Music merging with Pershing Square SPARC Holdings, an acquisition company approved by the U.S. Securities and Exchange Commission in 2023. If approved by investors, the transaction could close at the end of the year, according to the company.
Pershing is also calling for a new board, including former Disney chief Michael Ovitz as UMG chairman, and a new employment contract for current UMG Chief Executive Lucian Grainge.
Universal Music Group did not respond to a request for comment and has not yet responded to the proposal publicly.
Universal Music Group has its corporate headquarters in the Netherlands and has a local L.A. office in Santa Monica. The label was founded in 1996.
Over the years, it’s cemented its reputation as one of the music industry’s “Big Three,” alongside Warner Music Group and Sony Music Entertainment. Universal also controls smaller labels like Republic Records, Interscope Geffen A&M, Capitol Music Group and Def Jam Recordings.
The news has drawn some skepticism, as Ackman will need two-thirds of UMG’s investors to approve the proposed deal, including French billionaire Vincent Bolloré, who is UMG’s largest shareholder with a stake of more than 18%, according to Bloomberg.
Pershing Square has said it believes UMG’s stock price is underperforming, in part because of uncertainty around Bolloré’s stake, reduced returns on equity and the lack of investor credit in UMG’s valuation for its €2.7-billion ($3.13-billion) Spotify stake.
If finalized, UMG shareholders would receive 9.4 billion euros in cash, around 5.05 euros per share, or roughly $10.9 billion and $5.84 per share.
Investors would receive 0.77 shares in the new merged company. This would value the total consideration package of cash and stock estimated to be worth 30.40 euros ($35.21) per share, a 78% premium to UMG’s stock price. The transaction will also include the cancellation of 17% of UMG outstanding shares. The new UMG will have 1.541 billion shares outstanding.
Serona Elton, the director of the music industry program at the Frost School of Music at the University of Miami, said it’s difficult to predict what a deal would mean for the wider music industry, as it depends on how Pershing Square might change Universal Music Group’s strategy.
“As the world’s largest music company, any significant business changes would affect the broader music industry. The scale at which it does may be influenced by any change in leadership or recalibration based on financial market factors,” said Elton in a statement.
UMG’s stock price jumped over 11% to 19.05 euros ($22.06) Tuesday morning on news of the proposed acquisition.
This story originally appeared on LA Times
