French media conglomerate Vivendi has finalized a deal to sell a 10 percent stake in Universal Music Group to a so-called “blank check” company set up by Bill Ackman’s hedge fund Pershing Square, valuing the music major at €35.0 billion ($40 billion).
Vivendi has long been planning an initial public offering of the music firm in Amsterdam by late September, and that plan is still on, with the SPAC Pershing Square Tontine Holdings telling shareholders Sunday (June 20) that they will receive the shares in UMG later this year after the IPO. UMG will release a 22-minute video about the company to Pershing Square Tontine shareholders on Wednesday (June 23).
“As you can see from PSTH’s announcement, this investment represents a strong validation of UMG, our strategy, our people, our legendary catalog and our amazing roster of artists and songwriters,” UMG CEO Lucian Grainge wrote in a staff memo on Sunday. “And the fact that we now have, in addition to Vivendi, two committed investors — the consortium led by Tencent, as well as PSTH — is as powerful an endorsement as one could imagine from the investment and technology communities.”
Grainge added, “On Tuesday, at Vivendi’s General Shareholders’ Meeting, shareholders will consider Vivendi’s proposal to distribute 60% of the UMG share capital and list UMG’s shares on the Euronext Amsterdam stock exchange. I will keep you updated on all these developments.”
Vivendi previously sold a 20 percent stake in UMG to a consortium led by Chinese online giant Tencent. It has said it plans to distribute 60 percent of UMG, while retaining the remaining 10 percent for a minimum period of two years.
UMG is the world’s biggest music label and follows Warner Music to the public markets. Warner Music IPOd in 2020, with a $15 billion valuation. it is currently valued at just under $18 billion. The rise of streaming services like Spotify and social platforms like TikTok have significantly bolstered the music business in recent years.
Blank check companies, or Special Purpose Acquisition Companies (SPACs), take over privately held firms and usually take them public in an alternative to a traditional IPO. Over the past year-plus, Wall Street has seen a big number of SPAC IPOs.
This deal would be different, however, with UMG still set to go public via an IPO in the third quarter of 2021. Instead, Pershing Square Tontine said it will have about $1.5 billion left over after the UMG deal is complete, which it will use to try and find another company to take public. The company will also create what it calls a “SPARC,” which will be given to shareholders, trade separately and which will also seek to merge with another private company.
The deal is subject to the authorization of the plan to take UMG public by Vivendi shareholders at a shareholder meeting on June 22. The transaction would be the largest SPAC deal on record, according to Dealogic data.
Vivendi, led by CEO Arnaud de Puyfontaine, has previously said: “In addition, the Pershing Square funds and their affiliates have indicated that they may acquire additional economic exposure to UMG by acquiring Vivendi securities and/or by acquiring UMG securities following the distribution of UMG shares by Vivendi.”
Alex Weprin contributed to this report.
This article was originally published by The Hollywood Reporter.