Bill Ackman’s PSTH scraps Universal Music deal after SEC pushback -but the billionaire investor is still buying a stake

Ackman, Bill Ackman
Bill Ackman.

  • Bill Ackman’s PSTH won’t buy 10% of Universal Music for about $4 billion after SEC pushback.
  • The billionaire investor’s Pershing Square funds will purchase a stake in Universal instead.
  • PSTH now plans to pursue a conventional SPAC transaction.
  • See more stories on Insider’s business page.

Bill Ackman has scrapped his plan to buy 10% of Universal Music for $4 billion using his special-purpose acquisition company (SPAC) after federal regulators poured cold water on the proposed transaction, the billionaire investor told Pershing Square Tontine Holdings (PSTH) shareholders in a letter on Monday.

PSTH will transfer its share-purchase agreement to Ackman’s Pershing Square company and its affiliates, the investor wrote. That way, he still becomes a shareholder and Universal-owner Vivendi won’t be “left at the altar,” he added.

The SPAC’s board unanimously decided on Sunday to ditch the Universal deal after speaking to the SEC and realizing the agency would probably nix it. PSTH’s directors will now focus on completing a conventional SPAC deal, and have 18 months to close one unless shareholders vote for an extension.

Ackman was caught off guard by the backlash from some PSTH shareholders to the complexity and structure of the original deal, he noted in his letter. The investor also underestimated its potential impact on investors who can’t hold foreign securities, margin their shares, or own call options on PSTH stock, he added.

Before the SEC dashed his hopes, Ackman envisaged PSTH shareholders receiving Universal shares after Vivendi takes the division public this September, continuing to own PSTH stock while the SPAC sniffs out a merger free of the usual time constraints, and securing rights to buy shares in a new investment vehicle called a SPARC once it agrees its own transaction.

PSTH’s withdrawal from the Universal deal will disappoint some of Ackman’s fans, who spent seven months speculating about the identity of his acquisition target. Others who weren’t thrilled at the Universal deal might welcome the SPAC hitting the reset button on its search.

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Hedge fund manager Bill Ackman’s mega-SPAC seals $4 billion deal to buy 10% of Universal Music

bill ackman
Bill Ackman.

  • Bill Ackman has agreed a deal to buy 10% of Universal Music Group for about $4 billion.
  • Ackman’s Pershing Square Tontine Holdings will remain a public company following the transaction.
  • Shareholders are set to have UMG and PSTH shares plus the chance to back a new investment vehicle.
  • See more stories on Insider’s business page.

Bill Ackman’s pitch to buy 10% of Universal Music Group (UMG) for about $4 billion has been accepted, the billionaire investor announced on Sunday. He also confirmed his intention to pursue two more multibillion-dollar deals, paving the way for fresh intrigue after seven months of speculation about his original target.

Ackman’s Pershing Square Tontine Holdings (PSTH), a special-purpose acquisition company (SPAC), will purchase the minority stake in Drake and Billie Eilish’s record label from its parent company, Vivendi. The French media conglomerate intends to list UMG on the Euronext Amsterdam Exchange in September, and PSTH shareholders are set to receive their shares in the music group before the year ends.

“When the transaction is completed, our shareholders will directly own 10% of the common stock of an independent, publicly traded, large capitalization, extraordinary business with a superb management team,” Ackman and his team wrote in a presentation about the deal.

Unusually, PSTH will remain a public company after the transaction, and seek to deploy as much as $2.9 billion on another business combination. Ackman and his team are already searching for a compelling target, they said.

PSTH shareholders are set to receive UMG shares, continue to own PSTH shares, and will also be handed warrants to buy shares of a special-purpose acquisition rights company (SPARC) for $20 a pop. The SPARC, which hasn’t been approved by regulators yet, could be armed with up to $10.6 billion to pursue a separate business combination.

Ackman’s SPARC is similar to a SPAC, but it doesn’t let investors buy its shares until it has struck a deal. As a result, it doesn’t tie up their capital while it searches for a business combination, and also escapes the pressure of having to close a transaction within two years.

Read the original article on Business Insider