The sale of 70% of Universal Music Group by Vivendi becomes… complicated



At the end of last week, Vivendi’s plan to sell 70% of Universal Music Group seemed fairly straightforward.

The French company had planned – and still plans – to sell 60% of UMG to the Amsterdam stock exchange in September (September 21, to be precise).

Additionally, Vivendi was to sell 10% of UMG in a $ 4 billion transaction to Bill Ackman’s US-based SPAC, Pershing Square Tontine Holdings (PSTH).

That all changed today, when Ackman announced that his PSPC was canceling its acquisition and transferring its share purchase agreement to Pershing Square Holdings Ltd.

This, however, is not the end of the matter.

According to a Vivendi press release released today (July 19) regarding Bill Ackman’s switcheroo: “The participation in the capital finally acquired [by Pershing Square] UMG will now be between 5 and 10%. If it was less than 10%, Vivendi still intends to sell the shortfall to other investors before the distribution of 60% of UMG’s capital to Vivendi shareholders scheduled for September 21, 2021.

Oh yes, things are getting complicated.

Just in case you didn’t get it from Vivendi’s statement: Despite an agreement to buy 10% of UMG, it turns out that Pershing Square Holdings Ltd. do not do so, and may instead acquire a smaller amount from the large music company (between 5% and 10%).

In this case, Vivendi will be in the process of ceding the difference to a new additional buyer. (For example, if Pershing buys 6% of UMG, then Vivendi will deal with giving 4% of UMG to potential buyers and will seek to strike a deal before September 21.)

If Vivendi succeeds in offloading the 70% of UMG it owes by September 21 (i.e. 60% in the Amsterdam listing and an additional 10% in Pershing / Pershing plus an additional suitor) , this would mean that the French company would have sold some Universal in the last 18 months.

Vivendi initially sold 10% of UMG to a consortium led by Chinese Tencent in the first quarter of 2020, before selling the same consortium an additional 10% in the first quarter of this year.

Each of these deals cost the Tencent-led consortium € 3 billion ($ 3.5 billion at current exchange rates).

Daniel Kerven, Head of Research on Media and Internet Actions in Europe at JP Morgan Cazenove, suggested in february that his company now suggested “a blue sky valuation of 100 billion euros” for Universal Music Group.

Explaining PSTH’s decision to abandon its acquisition of UMG 10% earlier today, Bill Ackman wrote, “Our stock price has fallen 18% since the transaction was announced on June 4th. While we believe our shareholders recognize UMG’s extraordinary attributes, including its attractive growth characteristics, business quality and superb management team, we underestimated the reaction some of our shareholders would have to the complexity and complexity. the structure of the transaction.

“We also underestimated the potential impact of the transaction on investors who are unable to hold foreign securities, who have margins on their shares or who have call options on our shares.”Music trade around the world



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