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The best songs are often written for one special person, but have mass appeal. Bill Ackman’s cash-and-shares offer for Universal Music Group — with a headline price of €55bn — has the reverse problem. However much the activist hedge fund manager enthuses other shareholders, his deal won’t sing without the backing of Vincent Bolloré and his Vivendi media group, who own a combined 28 per cent stake. Ackman says the French mogul’s office is “intrigued”.
Ackman’s Pershing Square Capital, a current 4.6 per cent shareholder in Universal, is offering to buy the world’s biggest record label via a special acquisition company in a deal that would see the home of Billie Eilish and Taylor Swift relisted in New York. Universal has traded in Amsterdam since a 2021 spinout from Vivendi, the media group controlled by Bolloré. In voting terms, Pershing needs two-thirds of those voting to back its plans, meaning Bolloré is critical.
Ackman’s offer sounds complex at first blush. It involves paying Universal shareholders either €22 a share in cash — a 29 per cent premium to the undisturbed price — up to a maximum of €9.4bn (or pro-rata if there is additional demand), or a mix that gives investors €5.05 per share, for a total of that same cash, plus 88 per cent of the equity in the merged company.
In essence, however, through a merger with an empty box, what the financier is offering Universal investors is €2.5bn of new money, courtesy of Pershing Square, €1.5bn of cash from selling Universal’s stake in Spotify, plus a €5.4bn special dividend paid out from re-leveraging the company itself.
Whether investors take the deal or not depends on whether they believe — as Ackman himself does — that the new UMG, relisted in New York and featuring a board refresh involving talent agency supremo Michael Ovitz, balance sheet “optimisation” and an improved investor relations unit, will be worth a lot more than the old.
That may well be: Universal has suffered a combination of undervaluation and low debt. Indeed, the stock rose 13 per cent on Tuesday to give it a market value of €35bn. On top of that, Ackman’s move comes at an opportune time. Universal’s shares last month hit a low, down almost half from a 2024 peak after which investors began to fret about the threat from AI-generated music.
Of course, Universal executives could, in theory, put much of Ackman’s plan in motion themselves. Last month, they launched the company’s first buyback at up to €500mn — although they ruled out a US listing in the near term. Other elements of the deal, like selling Universal’s Spotify stake, should surely not be beyond the reach of the company itself.
There is also the question of how much value, exactly, an Ackman-sponsored Universal could create. For example, the headline €55bn offer number assumes that the new company will trade at 25 times forward earnings when listed in New York, a hefty jump from its current multiple of 18 and the 19 times of smaller US-listed rival Warner Music. Ackman is singing the right tune, but failing to hit the high notes.
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