Universal Music, takeover offer from Pershing Square

Bill Ackman's Pershing Square Capital announced that it has submitted an offer to buy Universal Music Group valuing the record label of Taylor Swift and Bad Bunny at over USD 63.48 billion. All with the aim of listing in the US, in a deal to boost the value of the world's largest record label.

Underlying this is an indictment of a stock that, according to Ackman, does not reflect the industrial strength of the company whose portfolio includes stars such as Taylor Swift, Bad Bunny, Kendrick Lamar and Drake. In the statement, Pershing's ceo - who has stepped down from Universal's board in recent months - puts his verdict in black and white: 'Umg's share price has remained stagnant due to a combination of issues unrelated to the performance of its music business and, more importantly, all of which can be resolved by this transaction. These include the uncertainty over the future of the Bolloré Group's 18 per cent stake in the company and Universal's failure to properly value its stake in the Spotify music streaming platform.

The proposal calls for Universal shareholders EUR 5.05 in cash per share, for a total outlay of EUR 9.4 billion, plus 0.77 shares in the new merged company. The total recognised value would be EUR 30.40 per share, with an indicated premium of around 78% over the pre-announcement reference price. The market, at least initially, applauded: Universal Music Group's share price jumped double digits on the Amsterdam Stock Exchange, while Vivendi and Bolloré, key shareholders in the group, also rose in Paris.

Ackman's transaction was born out of an understanding of the situation. Until May last year he sat on Universal's board of directors and had long argued for a US listing, convinced that Wall Street would guarantee higher multiples, liquidity and visibility than Europe. Now he is returning to the charge with a different vehicle and an operation that, if successful, would change both the major's financial geography and governance. Among the hypotheses put on the table by Pershing is also a new corporate structure in Nevada and the possibility of making the stock eligible for American indices, starting with the S&P 500.

The political crux of the operation remains. Because Universal is not just any public company. The shareholders include Bolloré, Vivendi and Tencent, as well as Pershing Square itself, assisted in the operation by Jefferies. And it is precisely the position of the Bolloré group that is read by some analysts as the real key to the dossier: without its support, the offer risks remaining a public pressure on the board rather than a viable route. Other observers, on the other hand, see in the proposal the necessary forcing of Universal to clarify strategy, governance and use of leverage.