Pershing Square Tontine Holdings Ltd. (PSTH, Financial), the special purpose acquisition company backed by billionaire hedge fund investor Bill Ackman (Trades, Portfolio), announced on Sunday it has signed a deal to buy 10% of Universal Music Group from Vivendi SA (XPAR:VIV, Financial) for $4 billion.
Valuing the world’s largest music company at more than $42 billion, the deal comes ahead of the French media giant’s plans to spin off and list Universal Music Group, which operates labels for artists like Taylor Swift, Billie Eilish, Drake and Justin Bieber, on the Euronext Amsterdam exchange in late September. At that time, 60% of the company’s shares will be distributed to Vivendi shareholders.
This is the second large investment in UMG in recent months. Earlier this year, a group of investors led by Tencent Holdings Ltd. (HKSE:00700, Financial) purchased an additional 10% stake in UMG, bringing the total equity controlled by the Chinese tech giant to 20%.
“The arrival of major American investors provides further evidence of UMG’s global success and attractiveness,” Vivendi said in a statement announcing the deal.
For its part, Pershing Square Tontine said it will distribute UMG’s shares to its shareholders “promptly following the completion of the listing.” The blank-check company will continue to exist as RemainCo with access to about $2.9 billion in cash, but will then seek to pursue another business combination with a private company.
In a statement, Ackman’s SPAC highlighted UMG’s “strategic attributes and competitive advantages,” including “predictable, recurring revenue streams that require minimal capital despite high growth.” The company has recorded strong operating profit growth of more than 20% per year since 2017. Analysts are also projecting 1.5 billion euros ($1.78 billion) in operating profit for 2021.
When completed, the Wall Street Journal reported the agreement, which is expected to be finalized during the third quarter, would mark the biggest SPAC transaction to date. Last summer, Totine became the biggest-ever SPAC when it raised $4 billion in an initial public offering. Ackman’s hedge fund committed a minimum of an additional $1 billion.
With a market cap of $4.54 billion, shares of Pershing Square Tontine were trading around $22.85 on Monday. According to GuruFocus data, the stock has tumbled nearly 20% year to date.
Yielding a marked cap of 31.44 billion euros, Vivendi’s Paris-listed shares closed 0.24% lower at 28.84 euros on Monday. Year to date, GuruFocus estimates the stock has gained nearly 10%.
