Pershing Square Holdings fulfilled its plans on Tuesday (Aug. 10) to acquire a stake in Universal Music Group ahead of Vivendi’s spin off on Sept. 21. The high-profile hedge fund led by Bill Ackman paid about $21.78 per share and $2.8 billion in total for 7.1% of UMG’s equity. The deal values UMG at 33 billion euros ($38.7 billion) equity value. PSH and its affiliates have the right to acquire another 2.9% of UMG’s ordinary shares by Sept. 9.
Tuesday’s announcement came three weeks after Pershing Square’s special purpose acquisition company (SPAC), Pershing Square Tontine Holdings, dropped its plans to buy a 10% stake in UMG in a complicated deal at a 35 billion euros ($41 billion) valuation. After PSTH investors lost interest, driving down the share price, and the Securities and Exchange Commission objected, according to Ackman, PSTH changed course. As an alternative, Ackman said the PSH hedge fund would step in and buy between 5% and 10% of UMG’s ordinary shares.
Ackman could be getting a bargain as UMG is arguably worth far more than 33 billion euros, according to a dozen analysts who cover Vivendi. The 12 reports examined by Billboard have an average valuation of 40.2 billion euros, giving PSH 22% upside on this investment. UMG could be worth far more: In a July 29 report following UMG’s strong second-quarter earnings, J.P. Morgan analysts predicted that its $62 million valuation — the highest of the dozen analyst valuations — “will ultimately prove conservative.”
This story is developing.
