Pershing Holdings In Talks To Acquire 10% Of Universal Music Group

A source has confirmed that William Bill Ackman's Pershing Square Tontine Holdings (PSTH.N) is holding negotiations with Universal Music Group, the largest music publisher in the world. This deal, which is still in the works, will give Pershing Square a 10% stake in Universal Music, for $4 billion. While it has been unclear how much Universal Music was worth, the deal pegs it at around $40 billion.

Founded 86 years ago, Universal Music is the biggest music company in the world and owners of popular labels like Def Jam Recordings, and Capitol Music Group. It also has globally acclaimed artists like Lady Gaga, the Beatles, and Justin Bieber. In the first quarter of 2021, the company recorded 1.8 billion euros in revenue, which is a 9.4% increase from the previous quarter. 

Universal Music Group's current owners are Vivendi, which is run by French billionaire Vincent Bollore, and Chinese tech company, Tencent. Tencent acquired a stake of the company in March 2020 for 3 billion euros, before acquiring another 10% in January 2021, giving them 20% of the company while Vivendi owns the major share(80%). 

This acquisition by Pershing is one of the largest special purpose acquisitions ever, with Pershing being a special purpose acquisition company.

A special purpose acquisition company, popularly called SPAC, is a company that isn't involved in any commercial operations and is formed only to raise capital (through an IPO) to acquire or merge with an already existing company. The already existing company then becomes a publicly listed company, capable of executing its IPO.

Universal Music has been intent on public listings this year and seems to want to do that via SPAC, rather than the much popular IPO. The SPAC industry has over $150 billion in cash waiting to be spent on taking private companies public, and Pershing Square is currently the largest there is. 

In July of 2020, Pershing Square Holdings raised a record $4 billion in an initial public offering for the SPAC market. The IPO share price was $20.

After news of the potential deal with Universal Music reached the public, Pershing's shares went down by about 6% to sit at $23.5. 

Universal Music owner Vivendi has also disclosed plans to list Universal Music on the stock exchange in Amsterdam by September, in a bid to distribute 60% of the music company to its investors.