Pan Xing Square launches a surprise attack on Universal Music! 78% premium acquisition + plans to list in the US by backdoor listing. Ackman aims to reshape the valuation of the record giant.

Billionaire hedge fund legend Bill Ackman, founder and personally helming Pershing Square Capital Management, has proposed a merger between the company's legal entity focused on mergers and acquisitions and Universal Music Group (UMG), which would involve moving the listing entity to an acquiring entity based in the United States. Ackman's global hedge fund giant has stated that this potential major acquisition would result in a significant premium of 78% to the valuation of one of the world's largest music recording companies compared to its previous closing price. According to a statement released by Pershing Square on Tuesday local time, shareholders who agree to the transaction will receive a total of approximately 9.4 billion euros (approximately 10.8 billion US dollars), which equates to 5.05 euros per share, and in addition, each shareholder of Universal Music Group will receive 0.77 shares of the new company. The hedge fund company plans to merge Universal Music Group with Pershing Square SPARC Holdings, Ltd., a SPARC company focused on acquisitions registered with the U.S. Securities and Exchange Commission (SEC). Ackman's "SPARC" design does not follow the traditional SPAC model of raising funds from investors and placing them in a trust before seeking targets. Instead, SPARC allows shareholders to decide whether to participate in the investment after a target has been identified and negotiations have been completed. Pershing Square explicitly stated in SEC filings that they opted for SPARC over SPAC to allow investors to invest funds when the target is clear and the transaction is close to completion, while minimizing the dilution issues commonly associated with traditional SPACs. The operators are Ackman and his Pershing Square system, with SPARC being the mechanism used, rather than the hedge fund management company itself. Pershing Square estimates that the offer is equivalent to 30.40 euros per share. However, UMG and the major shareholder Vivendi SE have declined to comment. At 9:27 am Amsterdam time, UMG's stock on the Dutch stock exchange surged by 12% to 19.08 euros, earlier in the day it increased by as much as 24%, marking the largest intraday gain since the company's stock was publicly listed on European exchanges in 2021. As of last week, the company had lost about 26% of its market value over the past 12 months, with its valuation at 31.4 billion euros at the close of trading last Thursday. Following the decline in stock price, Ackman is proposing a major overhaul of the veteran music recording company that owns top artists like Taylor Swift and Drake. The activist investor has had significant clashes with UMG management and has been pushing for the company to go public in the U.S. to increase the stock valuation. In a letter to the UMG board, Ackman stated that the company's stock has suffered from poor organization, including underutilization of the balance sheet and inadequate communication with investors. "The long-term underperformance of UMG's stock is the result of a variety of issues unrelated to the performance of its largest music business, and importantly, all of these issues can be addressed through this transaction," Ackman said in a statement. As part of the proposed acquisition, Ackman has suggested appointing former Disney CEO Michael 'Ovitz as Chairman, and two representatives from Pershing Square, headed by him, to join the board. Why is Ackman, who is pushing for an IPO of Pershing Square on the U.S. stock market, targeting this veteran record company? Ackman also stated that the long-term underperformance of UMG's stock is also due to uncertainty in the market about how French billionaire Vincent Bollor will eventually dispose of his stake. Bollor SE, controlled by Bollor, is the largest shareholder of Universal Music Group, holding an 18.5% stake; and media holding company Vivendi, also controlled by his family, holds another 10% stake. "Unless Bollor supports this move, this major proposal 'looks almost doomed from the start'," wrote Nicolas Marmurek, senior analyst at M&A consultancy Square Global, in a report. "We doubt Bollor will accept such conditions, and if he has already agreed, he would have endorsed the deal. Pershing Square placing this proposal in front of shareholders is a crucial move." Ackman resigned from the UMG board last year, citing other commitments. In the latest statement, Pershing Square announced that UMG would merge with SPARC, and the newly merged potential company would relocate its primary stock listing from Amsterdam to the New York Stock Exchange. This potential massive transaction would also cancel around 17% of UMG's shares. As Ackman seeks an IPO on the U.S. stock market, he is still determined to acquire Universal Music, a core reason being that he sees this company as a "high-quality, cash-flow stable, but mispriced world-class asset," and he believes the problem lies mostly in the location of listing, capital structure, governance, and communication with investors. Therefore, Ackman views Universal Music Group as an asset that can quickly release value through financial engineering and market re-pricing. Ackman's move at this time is driven by two deeper motivations. Firstly, Universal Music Group is a target he has long been familiar with and has attempted to restructure/hold a stake in multiple times. In 2021, he tried to take a majority stake in Universal Music through a SPAC, so this is not a sudden decision, but an upgraded version of an "unfinished acquisition deal". The second reason is that as Pershing Square advances its IPO on the U.S. stock market to attract more permanent capital and a broader investor base, closing a deal with a global veteran company like Universal Music can strengthen his reputation for "creating value through aggressive investing and capital operations," while demonstrating to potential investors that Pershing Square after going public will not be a passive holding machine, but an asset management platform that can actively create value catalysts. Ackman's potential IPO of Pershing as a "combination IPO" marks his long-term shift towards a "Berkshire" model: no longer just the traditional hedge fund structure of "fundraising fees redemptions," but seeking more stable, long-term capital for allocations, striving to transform Pershing from a star hedge fund into a platform that resembles a "publicly traded long-term investment empire".