Bill Ackman’s SPAC falls after confirming talks to acquire 10% of Universal Music in long-awaited deal

FILE PHOTO: FILE PHOTO: Bill Ackman, CEO of Pershing Square Capital, speaks at the Wall Street Journal Digital Conference in Laguna Beach, California, U.S., October 17, 2017. REUTERS/Mike Blake/File Photo
  • Bill Ackman’s SPAC fell as much as 11.6% Friday after it confirmed it is in talks to reach a deal with Universal Music.
  • Pershing Square Tontine Holdings’ investment could value the music group at $40 billion.
  • The size of the blank check firm and prominence of Ackman has had investors eagerly awaiting news of the deal since PSTH went public last summer.
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Billionaire Bill Ackman’s special purpose acquisition company Pershing Square Tontine Holdings fell as much as 11.6% Friday after it confirmed it is in talks to reach a deal with Universal Music.

Shares of the blank check company traded around $22.50 shortly after the Friday opening bell.

Friday morning Pershing Square Tontine Holdings confirmed that it is in discussions with Vivendi to acquire 10% of the outstanding ordinary shares of Universal Music Group for approximately $4 billion.

The deal with Universal would be the largest SPAC transaction on record, according to the Wall Street Journal. It would have an enterprise value of about $42 billion.

Ackman’s pending deal with Universal Music was first reported by The Wall Street Journal. PSTH shares fell as much as 8% in Thursday aftermarket trading after the news broke.

The size of the blank check firm and prominence of Ackman has had investors eagerly awaiting news of the deal since Pershing Square Tontine went public last summer.

In a press release, Ackman called Universal Music Group “one of the greatest businesses in the world,” and touted the deal as an “iconic transaction.” He highlighted UMG’s leading market share, stellar management, exposure to music streaming, minimal capital needs, and several other attributes that attracted him to the business.

But not all investors are excited about the acquisition. A measure of social sentiment showed that users on StockTwits were largely bearish on the SPAC Friday morning.

“SPACs are dead 🙂 I’m glad you all got burnt. Stop buying bull s**t,” one user wrote. “Told u all it’s not starlink,” another said.

Ackman’s hedge fund and its affiliates have the right to buy another $1.4 billion of PSTH stock, meaning the vehicle could be armed with almost $3 billion to pursue another business combination.

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Billionaire investor Bill Ackman’s SPAC is close to striking a deal with Universal Music, report says

bill ackman
Bill Ackman

  • Bill Ackman’s SPAC is close to striking a deal with Universal Music, The Wall Street Journal said.
  • Pershing Square Tontine Holdings could agree a transaction valuing the music group at $40 billion.
  • Universal Music, a division of Vivendi, racked up $9 billion in revenue last year.
  • See more stories on Insider’s business page.

Billionaire investor Bill Ackman’s special-purpose acquisition company (SPAC) is close to agreeing a transaction with Universal Music Group that would value the music titan at $40 billion, The Wall Street Journal reported on Thursday, citing people familiar with the matter.

Ackman’s Pershing Square Tontine Holdings might finalize the megadeal in a matter of weeks, although it could still fall through, sources told The Journal. PSTH shares fell as much as 8% in aftermarket trading after the news broke.

Universal Music, which represents artists including Taylor Swift and Billie Eilish, is currently owned by Vivendi, a French media conglomerate. The segment grew constant-currency revenue by 5% to 7.4 billion euros ($9 billion) last year, and operating income by 20% to 1.4 billion euros, Vivendi’s latest annual report shows.

Vivendi disclosed in mid-May that it was considering selling 10% of Universal Music to an “American investor” – which may be Ackman – or pursuing a public offering of 5% to 10% of the segment’s shares. Tencent, a Chinese technology conglomerate, doubled its stake in Universal Music to 20% last year, valuing the business at 30 billion euros.

Ackman, the boss of Pershing Square Capital Management, said last month that his team had identified an “iconic, phenomenal, great business” back in November 2020, and he hoped to strike a deal to purchase a piece of it within the next few weeks. He said the target was so attractive and interesting that it was “worth the energy and the effort.”

The hedge fund manager took PSTH public last summer with the goal of spending around $5 billion for a minority stake in a private business. Ackman’s reputation as a top investor – boosted by his lucrative pandemic hedge and his fund’s 70% gain last year – and the size of his SPAC prompted intense speculation about his possible target.

Pershing Square Capital Management declined a request for comment from Insider.

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