In a significant move that could transform the ownership structure of the world’s largest music company, billionaire hedge fund manager Bill Ackman has put forward a complex proposal to acquire the Dutch-American Universal Music Group (UMG).
The deal proposes combining UMG with Pershing Square SPARC Holdings, the US-based acquisition entity linked to Ackman's firm, Pershing Square Capital Management.
Home to global stars including Taylor Swift, Drake and Sabrina Carpenter, UMG has seen its shares fall roughly 26% over the past year amid concerns over an underutilised balance sheet and uncertainty surrounding the intentions of key shareholders.
Outlined in a statement and letter to the board on Tuesday, the plan values the Amsterdam-listed group at €56 billion, or €30.40 per share, representing a 78% premium to its closing price the previous Thursday, when the offer was reportedly made.
Under the cash-and-share offer, participating shareholders would receive €5.05 per share in cash, amounting to €9.4 billion in total, together with 0.77 shares in the new combined entity.
The transaction would secure a primary listing on the New York Stock Exchange, an ambition UMG has explored but deferred because of market conditions. It would also cancel roughly 17% of the company’s shares.
Funding for the cash portion would come from €2.5 billion provided by Pershing Square, €5.4 billion in fresh debt taken on by the merged group and the sale of UMG’s holding in Spotify, expected to raise around €1.5 billion after taxes and artist payments.
Ackman’s plan further anticipates unlocking €15 billion over five years through more efficient use of the balance sheet to support investments, acquisitions and share buybacks.
The billionaire, who stepped down from UMG’s board last year, maintained that the company’s share price had failed to reflect its strong operational performance.
"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," Ackman stated.
The proposal also includes governance reforms, such as appointing Michael Ovitz, the former Walt Disney president, as chairman, alongside two representatives from Pershing Square.
Market reaction, shareholder dynamics and industry backdrop
UMG shares rose sharply in Amsterdam trading on Tuesday, climbing as much as 24% intraday.
Neither UMG nor any major shareholders have commented on the proposal.
According to data compiled by Bloomberg, French-owned Vivendi SE holds about 10% while the Chinese multinational Tencent Holdings has around 11%. Other investors will also play a pivotal role in any outcome.
Uncertainty over what French billionaire Vincent Bolloré will ultimately do with his stake has also weighed on shares, Ackman stated. The family’s Bolloré SE is UMG biggest shareholder with a more than 18% stake and also owns Vivendi SE.
Analyst Nicolas Marmurek of Square Global described the offer as potentially “dead from the start” without support from the Bolloré family, which engineered UMG’s 2021 spin-off from Vivendi and its Amsterdam listing.
"We doubt Bolloré will accept such terms, and had Bolloré been on board he would be recommending the transaction," Marmurek noted in a research note.
"This is very much a move by Pershing Square to put the proposal in front of shareholders," he added.
Whether the proposal advances remains to be seen, but it has already refocused attention on one of the music industry’s most powerful players at a moment when streaming revenues continue to expand.
