The white-checking company backed by billionaire hedge fund Bill Ackman has confirmed the purchase of a 10 percent stake in Universal Music Group, Taylor Swift’s label, for $4 billion.
As part of the deal, the first of its kind for a private takeover, Pershing Square Tontine Holdings, Ackman’s investment vehicle, will distribute shares to its shareholders only after Vivendi, the French owner of UMG, completes its planned listing of the stock in Euronext Amsterdam.
PSTH will continue to exist after the transaction with access to up to $2.9 billion in cash, and “intends to pursue business integration with operational businesses immediately.” PSTH said the project value for the new deal was €35 billion.
confirm the deal, mentioned Earlier this month by the Financial Times, it comes as Vivendi is trying to pull money from its lucrative unit amid a surge in profits in the music business.
The French media group, controlled by billionaire Vincent Bollory, previously sold 20 percent of Universal to China’s Tencent.
In an email sent to his employees on Sunday, UMG CEO Lucien Grange hailed the deal with Ackman as part of a “new chapter” for the brand.
He wrote: “As you can see from the PSTH announcement, this investment represents a powerful affirmation of the health of UMG, our strategy, our people, our legendary catalog and our incredible roster of artists and songwriters.”
“And the fact that we now, in addition to Vivendi, have two committed investors — the consortium led by Tencent, as well as PSTH — is as strong a support as one can imagine from the investment and technology communities.”
PSTH beat out competition from private equity firm Hellman & Friedman, which offered to buy a 10 per cent stake in Universal at a valuation of €30 billion.
Music companies have gained value in recent years due to rising royalty payments from streaming services like Spotify.
The PSTH statement noted UMG’s operating profit growth of more than 20 percent annually since 2017 and analysts’ forecasts of more than 1.5 billion euros in 2021, an operating profit margin of 19 percent.
Universal, which includes businesses including Kanye West and Lady Gaga, has nearly 30 percent of the market, Midia Research estimates.
Spacs are investment vehicles that raise money through public listings in order to find private companies to go public, although increased regulatory scrutiny has slowed the number of listings recently.