Pershing Square offers 9.4 billion to buy Universal Music

The American hedge fund Pershing Square announced that it has submitted an offer to acquire Universal Music Group through fusion. The company led by Bill Ackman believes that the musical giant is underestimated by stock markets.

Pershing Square stated that the offer to the shareholders of Universal include 9.4 billion euros ($10.9 billion) in cash plus shares of the new entity, which would boast a catalog of leading artists come Taylor Swift e Lady Gaga.

Offer details

The US fund Pershing Square Capital announced that it has submitted an offer to acquire Universal Music Groupwith an operation that values ​​the company approximately 60 billion dollars. The investor Bill Ackman thus tries to get hold of it largest record label in the worldwhich holds the rights to artists currently on the crest of a wave in the USA such as Bad Bunny e Taylor Swift and immortal legends like i Beatles e Bob Dylan. The offer, if approved, would close by the end of the year and would involve Universal merging with Pershing Square Sparc Holdingsa special purpose vehicle created for acquisitions. At the moment the market seems to approve, with the Universal shares who earn more than 10% on the price list Amsterdam.

Bill Ackman’s profile

ackman59 years old, New Yorker, with his hedge fund has earned the label of activist investorcapable of changing the cards on the table in the boards of directors of large companies. In 2004 he founded Pershing Squareinvestment company with $30 billion in assets under management. The fund invests primarily in a concentrated portfolio of companies high qualitycapable of generating consistent cash flows and with one lasting growth.

Ackman’s motivations

If purchasing the Universal went through, notes the Wall Street Journalthe new company would be based in Nevada and would move the price of its shares from Amsterdam a Wall Street. “The price of actions” from the Universal Music Group “has remained stagnant due to a series of problems unrelated to the progress of its music business and, above all, all solvable with this transaction”, he explains ackman.

Universal artists

Universal counts among its artists some of the most successful names on the global music scene, including Kendrick Lamar, Elton John, Coldplay e Billie Eilish. This is one of three major record companiestogether with Warner Music Group e Sony Music Entertainmentstops a market share above 30% in the global industry recorded music. Universal’s major shareholders include the French billionaire Vincent Bolloré, Vivendi SE and Chinese Tencent. Together, they control a substantial share of the voting rights in the company.

Proposal details and evaluation

The proposal of Pershing Square provides that any agreement requires a two-thirds majority to be approved. The proposal of ackmandivided between cash and sharesis based on several hypotheses regarding the future society. TO 30.40 euros per shareequivalent to 35.15 dollars, the current one share capital in circulation would have a value greater than 63 billion dollars.

Financial strategy and future value

The fund estimated that the deal will allow the new company to pay off the 17% of its sharesleaving a net worth of approx 58 billion dollars after payment of the cash component. The figure assumes that the value of the new company’s shares will be substantially higher than that of the existing company. Pershing Square claims this is possible because among the first moves the new company will go into debt for 5.4 billion euros and will sell its stake in Spotify per 1.5 billion euros.

Stock price estimation and options

The price of actionsremember the Wsjfurthermore it is estimated based on the forecasts of future profits. The current ones shareholders they will be able to request to receive all the shares or all the money. If enough shareholders opted for just the shares, those who would receive all the money would receive 22 euros per share.