Activist investor Pershing Square said Tuesday it is planning to buy Universal Music Group in a cash and stock deal worth about 55.8 billion euros ($64.4 billion).
Under the terms of the proposal, shareholders would receive a total of 9.4 billion euros ($10.85 billion) in cash and 0.77 shares of new stock for each share of UMG held. That amounts to a total deal value of 30.4 euros per share, a 78% premium to UMG’s closing share price on April 2, Pershing said in a Tuesday statement.
UMG shares were last trading 11% higher, having fallen 23% so far this year.
Universal Music shares year to date.
“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,” said Pershing Square CEO Bill Ackman in the Tuesday 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.”
He highlighted several factors behind UMG’s underperformance, including uncertainty surrounding Bollore Group’s 18% stake in the company, the postponement of its U.S. listing, and “suboptimal” shareholder communications and engagement.
UMG will form a newly merged company with Pershing Square and list on the New York Stock Exchange, according to the terms of the transaction, which is expected to close by the end of the year.
Pershing proposed a board refresh, calling for Michael Ovitz, “one of the most recognized global entertainment executives,” to be named as UMG chairman. The proposals would see an additional two Pershing Square affiliates join UMG’s board.
The deal is also subject to a new employment contract and compensation arrangement for UMG CEO Lucian Grainge.
UMG was spun out of French media group Vivendi, with controlling shareholder Vincent Bollore retaining a stake worth around 5.9 billion euros at that time. The company behind platinum-selling artists, including Lady Gaga and Taylor Swift, was listed on the Euronext Amsterdam stock exchange in 2021 with an initial valuation of 46 billion euros.
Vivendi and Bollore‘s stock traded up 11% and 6.3%, respectively, on Tuesday.
Billionaire Ackman has advocated for UMG, the world’s largest music company, to shift its primary listing to the U.S., arguing that the stock trades at a large discount to its intrinsic value with limited liquidity.
CNBC has already reached out to Bollore and UMG for comment. Vivendi declined to comment on the news.
