Activist investor Pershing Square has announced plans to acquire Universal Music Group in a combination of cash and stock valued at $64.4 billion.
UMG will create a new merged company with Pershing Square and list it on the New York Stock Exchange, as part of the deal. The transaction is expected to be completed by the end of the year.
Pershing Square CEO, Bill Ackman, told investors, “Since UMG’s listing, Sir Lucian Grainge and the company’s management have done an excellent job nurturing and continuing to build a world-class artist roster and generating strong business performance. However, UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business and importantly, all of them can be addressed with this transaction.”
Pershing Square believes that UMG’s stock price underperformance is principally due to the following factors:
- Uncertainty concerning the Bolloré 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 €2.7 billion stake in Spotify
- Suboptimal shareholder investor relations, communications, and engagement
Following the announcement, UMG shares are up 11%, after falling 23% earlier this year.
By CEO NA Editorial Staff
