Pershing Square Capital Management (LSE:PSH) announced on Tuesday that it has put forward a non-binding offer to acquire Universal Music Group (EU:UMG), valuing the music company at roughly €30.40 per share—about 78% above its current market price.
According to the proposal, UMG shareholders would receive €5.05 per share in cash, representing approximately €9.4 billion in total, alongside 0.77 shares in a newly listed company for each UMG share they hold.
The hedge fund, led by chief executive Bill Ackman, said the deal would be carried out through a merger with Pershing Square SPARC Holdings. The transaction would result in a U.S.-listed entity trading on the New York Stock Exchange under U.S. GAAP reporting standards, potentially making it eligible for inclusion in the S&P 500 index.
Ackman argued that UMG’s shares have “languished” despite strong operating performance, pointing to factors unrelated to the underlying music business. These include uncertainty surrounding Bolloré Group’s 18% shareholding, delays to a planned U.S. listing, what he described as an underutilised balance sheet and the absence of a clearly defined capital allocation strategy. He also highlighted what he believes is a lack of market recognition for UMG’s €2.7 billion stake in Spotify.
“Sir Lucian Grainge and the company’s management have done an excellent job… generating strong business performance,” Ackman said.
“However, UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business.”
Pershing Square said it expects the transaction could be completed before the end of the year. The equity portion of the financing would be fully supported by Pershing Square and its affiliates, while debt financing would be secured at the time of signing.
If completed, the deal would result in the cancellation of about 17% of UMG’s outstanding shares, leaving the newly formed entity—referred to as New UMG—with around 1.54 billion shares outstanding, while maintaining an investment-grade balance sheet.
Legal advice to Pershing Square and SPARC is being provided by Sullivan & Cromwell, White & Case and Stibbe, with Jefferies acting as financial adviser.
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