Billionaire investor Bill Ackman’s Pershing Square (PSHP.L) has launched a significant takeover bid for Universal Music Group (UMG.AS), proposing a $64 billion (55.75 billion euros) deal. This latest move marks a renewed push in Ackman’s nearly five-year pursuit of the music label giant. Universal Music Group is a global music entertainment company, home to international superstars including Taylor Swift, Billie Eilish, and Kendrick Lamar. The unsolicited cash-and-shares proposal values UMG at approximately 30.40 euros per share, representing a substantial 78% premium over its last closing price of 17.10 euros.
Pershing Square’s proposal outlines a plan for UMG to transition its listing from Amsterdam to New York, a move Ackman believes would attract a broader investor base, ultimately leading to more robust earnings and a higher valuation. Despite the music industry’s overall growth, UMG’s share price has reportedly lagged, an issue Ackman aims to rectify. He asserts that UMG has “never really graduated” from operating like a private entity, highlighting an “underutilized balance sheet.” Universal Music Group acknowledged receipt of the nonbinding proposal, stating its board would review it with advisors, while reaffirming confidence in its current strategy and leadership.
Ackman, known for his activist investing, is adopting a friendlier approach this time, having reportedly discussed the potential merger with UMG Chairman and CEO Sir Lucian Grainge. The deal proposes retaining Grainge as CEO, alongside adding new directors, including former Hollywood superagent Michael Ovitz as board chair, and two Pershing Square representatives. However, this ambitious move hinges on winning over major shareholders like Bollore Group, Vivendi, and Tencent, who control significant stakes and voting rights. Factors such as fears surrounding artificial intelligence disrupting the music industry, coupled with UMG’s sliding market share and decelerating streaming growth, have contributed to its lacklustre performance – issues Ackman aims to address. UMG shares surged 13% on Tuesday following the announcement.
