Bill Ackman’s Pershing Square Capital Unveils Takeover Bid for Universal Music Group

Bill Ackman‘s Pershing Square Capital Management disclosed early Tuesday that a takeover bid for Universal Music Group has been submitted to UMG’s board. The offer includes about $10.9 billion in cash, plus additional stock that pushes the total consideration to about $35 a share.

Pershing Square said that UMG’s stock has been undervalued because of uncertainty around the company’s ownership structure and around UMG’s stake in Spotify, and by the company’s delay of its planned stock listing in the U.S. Ackman previously struck an agreement with the company last year to establish a secondary listing in the U.S. in addition to its primary home on the Euronext Amsterdam listing.

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The Wall Street Journal pegged the total value of the offer at more than $63 billion.

Ackman praised UMG’s current regime led by Lucian Grainge for cultivated an unparalleled artist roster. But the financial performance has been lacking. Ackman is one of the loudest hedge fund investors out there, exerting enormous influence through social media, podcasts and media interviews.

“Since UMG’s listing, Sir Lucian Grainge and the company’s management have done an excellent job nurturing and continuing to build a world-class artist roster and generating strong business performance,” Ackman said in a statement. “However, UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business and importantly, all of them can be addressed with this transaction.”

Ackman, who has been sparring with UMG management since he acquired 10% of UMG in a deal with Vivendi in 2021, asserted that “all Transaction equity financing will be backstopped by Pershing Square and affiliates, and all debt financing will be committed at signing.”

Pershing Square asserted that the offer is a 78% premium to UMG’s recent trading price in the $19.60 range. In addition to cash, shareholders would receive 0.77 shares of New UMG stock for each share of UMG held. Per Pershing Square, the deal “will enable the cancellation of 17% of UMG outstanding shares while preserving the company’s investment grade balance sheet and its long-term financial and strategic flexibility. New UMG will have 1.541 billion shares outstanding.”

Pershing Square’s statement included a bullet point list of reasons why UMG’s board should embrace the takeover offer, including “uncertainty concerning the Bolloré Group’s 18% stake in the company,” what it described as the “underutilization of UMG’s balance sheet, which has led to reduced returns on equity” and “the absence of a publicly disclosed capital allocation plan and earnings algorithm.”

Representatives for Universal Music Group did not immediately respond to requests for comment.