Pershing Square proposes Universal Music Group merger

Pershing Square (PSHZF) announced that it has submitted a non-binding proposal to the board of directors of Universal Music Group (UMGNF) (UMG) to acquire all outstanding shares of UMG through a business combination transaction. All transaction equity financing will be backstopped by Pershing Square and affiliates, and all debt financing will be committed at signing. Pershing Square believes that UMG’s stock price underperformance is principally due to the following factors: uncertainty concerning the Bollore Group’s 18% stake in the company; the postponement of UMG’s U.S. listing; the underutilization of UMG’s balance sheet, which has led to reduced returns on equity; the absence of a publicly disclosed capital allocation plan and earnings algorithm; the lack of investor credit in UMG’s valuation for its EUR 2.7B stake in Spotify (SPOT) and suboptimal shareholder investor relations, communications, and engagement. In the transaction, UMG will merge with Pershing Square SPARC Holdings, and the newly merged company will become a Nevada corporation, listed on the New York Stock Exchange. Pershing Square expects the transaction to close by year-end. Shareholders will receive a total of EUR 9.4B in cash, or EUR 5.05 per share, and 0.77 shares of New UMG stock for each share of UMG held. New UMG will publish financial statements under U.S. GAAP and be eligible for S&P 500 and other index inclusion. The transaction will enable the cancellation of 17% of UMG outstanding shares. New UMG will have 1.541B shares outstanding.