Deal: Bill Ackman’s SPAC To Buy 10% Of Universal Music

Bill Ackman

Following confirmation of deal talks earlier this month, Pershing Square Tontine Holdings, a SPAC formed by famous activist investor Bill Ackman, has officially signed a deal to buy 10% of Universal Music Group (UMG), a “big four” record label. 

  • Pershing Square Tontine Holdings (PSTH) will buy the 10% stake from Universal’s current owner, the French media conglomerate Vivendi. The purchase values the major record label at €35 billion ($41.6bn).
  • Shortly after PSTH buys its stake, Vivendi plans to list Universal Music on the Euronext Amsterdam stock exchange towards the end of September.
  • With the deal, PSTH will become a UMG shareholder along with parent firm Vivendi and China’s Tencent.
  • The structured deal is unusual for special-purpose acquisition companies like PSTH. Normally, a SPAC would merge with a single company by buying a certain percentage of it with its cash and combining its equity, but in PSTH’s case, it’ll buy a stake in Universal and then rollover cash left in the SPAC into a separate entity that’ll seek another merger target.
  • PSTH has $5.6bn in cash in its coffers, of which $4.1bn will buy the 10% stake in Universal and the remaining $1.5bn will be rolled over into a new entity known as a SPARC (Special Purpose Acquisition Rights Company).
  • The way Ackman structured PSTH’s deal is a game-changer in the world of SPACs. As a well-known hedge fund manager, he’s definitely not new to putting together interesting deals. For a fact, Ackman had already gotten into SPACs before it became the hot new thing.
  • Once the purchase is completed, the new SPARC entity to be formed will be named PSTH Remainco. As it’s structured, it won’t get access to cash from investors until it’s found a merger target, hence the Rights in Special Purpose Acquisition Rights Company.

Photo credit: Insider Monkey

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