Billionaire investor Bill Ackman has been forced to rejig a $4bn deal to buy a 10 per cent stake in Vivendi’s Universal Music Group, after investors and regulators criticised his original SPAC plan.
Pershing had agreed last month to buy 10 per cent of the world’s largest music company through a blank-cheque company called Pershing Totem Holdings (PSTH).
But Ackman’s main hedge fund Pershing Square will now replace the special purpose acquisition company (SPAC) as the investor, the group said in a statement on Monday morning.
PSTH said the deal overhaul was prompted by questions raised by the US Securities and Exchange Commission (SEC) over its adherence to New York stock exchange rules.
“Our decision to seek an alternative initial business combination (“IBC”) was driven by issues raised by the SEC with several elements of the proposed transaction – in particular, whether the structure of our IBC qualified under the NYSE rules,” PSTH said in a letter to shareholders.
Pershing had multiple conversations with the SEC in an attempt to change its position on the issues it identified, the group said, but decided it was “in the best interest of shareholders” for Pershing Square to buy the stake from Vivendi instead.
The group alluded to the deal’s structure – whereby the SPAC would buy a 10 per cent stake in Universal rather than the entire company, as is most common – having caused concerns amongst shareholders.
“We underestimated the reaction that some of our shareholders would have to the transaction’s complexity and structure,” PSTH said, adding that the SPAC’s share price had fallen by 18 per cent since the transaction was announced on June 4th.
“Yet, despite the inability of PSTH to consummate the UMG transaction, our counterparty was not left at the altar. Pershing Square will be fulfilling PSTH’s commitment to Vivendi,” Ackman said in the statement.
It added that Ackman’s SPAC would try to find a new merger partner, while the main hedge fund Pershing Square planned to be a long-term shareholder in Universal.
In a separate statement, the music group’s majority owner Vivendi said that the new investment via Pershing Square would represent between 5 per cent and 10 per cent of Universal’s capital, so it would open the sell-off up to other investors to make up the difference if it were less than 10 per cent.
The deal will allow Vivendi to cash in on its prize asset, which is home to stars including Taylor Swift and Lady Gaga.
Universal — the world’s largest music group — has benefited from an industry-wide resurgence in the value of music rights thanks to the growing popularity of streaming services such as Spotify, and is set to list in Amsterdam later this year.