Bill Ackman's SPAC drops deal to buy 10% of Universal Music

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CNBC Television 19 July, 2021 - 05:37am 15 views

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Bill Ackman’s SPAC drops $4B Universal Music deal over SEC scrutiny

New York Post 19 July, 2021 - 06:55am

By Will Feuer

July 19, 2021 | 7:55am | Updated July 19, 2021 | 7:55am

Billionaire investor Bill Ackman announced Monday that his firm is dropping plans to use his SPAC to invest in Universal Music Group after the Securities and Exchange Commission raised questions over the deal.

Ackman announced last month that his SPAC, or special-purpose acquisition company, called Pershing Square Tontine Holdings, would buy a 10 percent stake in UMG — which is home to Drake, Taylor Swift and Billie Eilish — for $4 billion.

But the billionaire investor said Monday in a letter to shareholders that his investment firm’s board had unanimously decided not to proceed with the deal after discussions with US regulators.

“Our decision to seek an alternative initial business combination (‘IBC’) was driven by issues raised by the SEC with several elements of the proposed transaction – in particular, whether the structure of our IBC qualified under the NYSE rules,” Ackman said in the letter, which was addressed to shareholders.

Ackman added that Pershing Square will now seek a “conventional” SPAC merger. It has 18 months to find another target unless shareholders vote for an extension.

Since the announcement of the proposed deal with UMG last month, Ackman noted, the stock price of his blank-check company has fallen 18 percent.

The proposed deal took on a relatively unique structure that set it apart from most other SPACs, which typically merge with an unlisted business and take it public.

But Ackman’s NYSE-listed SPAC didn’t intend to merge with UMG, but rather become a shareholder ahead of an already-planned listing by Universal.

In his letter to shareholders Monday, Ackman acknowledged shortcomings of the structure of the deal, including its “impact on investors who are unable to hold foreign securities, who margin their shares, or who own call options on our stock.”

It remains unclear, though, what specifically irked officials at the SEC, which has been ramping up scrutiny of SPACs across the board in recent months after an explosion of the financial instrument over the past 18 months.  

Despite the deal falling apart, Ackman added that Vivendi was not being “left at the altar,”

Ackman said his investment firm, Pershing Square Holdings, will instead take a stake in UMG and become a long-term shareholder of the company.

Universal Music Group’s French owner, Vivendi, said in a separate statement that Pershing Square will take a 5 percent to 10 percent stake in the company.

Pershing Square SPAC exits Universal Music deal

KXAN.com 19 July, 2021 - 06:29am

FILE – In this Nov. 12, 2019 file photo, billionaire investor William Ackman appears for a speech at the Economic Club of New York at the New York Hilton Midtown in New York. Ackman is walking away from a deal announced last month in which he would take a 10% stake in Universal Music Group through a special-purpose acquisition company. In a letter Monday, July 19 to shareholders of his investment fund, Pershing Square, Ackman cited questions from the Securities and Exchange Commission about whether the structure of the SPAC qualified under the rules of the New York Stock Exchange. (AP Photo/Andrew Harnik, File)

Billionaire Bill Ackman is walking away from a deal announced last month that would have given him a 10% stake in Universal Music Group, the label that is home to Taylor Swift, Billie Eilish, Lady Gaga, and the Beatles.

In a letter Monday to shareholders of his investment fund, Pershing Square, Ackman cited questions from the Securities and Exchange Commission about whether the structure of a special-purpose acquisition company would allow such an acquisition under the rules of the New York Stock Exchange.

Vivendi SA last month confirmedthat its Universal Music Group was in talks to sell a 10% stake to Pershing’s special-purpose acquisition company, or SPAC, in a deal that would value the record label at about $40 billion. The 10% stake would have gone for around $4 billion.

A SPAC is typically a group of larger investors who raise money for acquisitions and then seek out acquisition targets. The deal announced by Ackman last month was unique because unlike a rush of SPACs that have rolled out this year, the intent was not to merge with Universal, but to take a stake in the company that had already announced plans to go public.

On Monday, Vivendi Vivendi said that it had instead approved the acquisition of as much as 10% of Universal by funds associated with Ackman.

Ackman’s SPAC, called Pershing Square Tontine Holdings Ltd., now has 18 months left to close a new transaction, unless shareholders vote for an extension. Ackman said that because of the experience with the proposed Universal Music transaction, its next business combination would be structured as a conventional SPAC merger.

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Bill Ackman Drops SPAC Plan for Universal Music Deal

The Wall Street Journal 19 July, 2021 - 02:07am

Mr. Ackman said his investment firm, Pershing Square Holdings Ltd., would instead take a stake in Universal and become a long-term investor in the company. The U-turn is a setback for Mr. Ackman, who crafted a first-of-its-kind pact that set it apart from a wave of other deals orchestrated recently by special-purpose acquisition companies.

In June, Mr. Ackmann said his SPAC had agreed to buy a 10% stake in Universal from French media conglomerate Vivendi SE for about $4 billion. The deal valued Universal at some $40 billion. Typically, such deals involve a previously listed SPAC, or blank-check company, merging with an unlisted business, taking it public.

Mr. Ackman’s deal was different: New York Stock Exchange-listed Pershing Square Tontine Holdings Ltd., the SPAC, didn’t intend to merge with Universal but instead become a shareholder ahead of an already-planned listing by Universal in the Netherlands. People familiar with the matter said it was structured that way because of tax and legal implications for Vivendi, The Wall Street Journal reported.

The structure was hailed by some as a feat of financial engineering that also freed Mr. Ackman from some of the usual constraints of SPACs. In another departure from the typical SPAC structure, investors weren’t slated to vote on the deal.

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Bill Ackman’s Pershing Square Tontine drops deal to buy 10% of Universal Music

CNBC 19 July, 2021 - 01:28am

Billionaire investor Bill Ackman's blank-check company Pershing Square Tontine Holdings said Monday it has dropped a deal to buy 10% of Vivendi's flagship Universal Music Group.

Ackman's SPAC last month agreed to buy 10% of the French media group's crown jewel for around $4 billion. Now, his Pershing Square Holdings hedge fund will take the stake instead of the SPAC.

Vivendi shareholders recently backed the spinoff of Universal, a move that gave the company an enterprise value of 35 billion euros ($41.55 billion). The music corporation is home to stars including Taylor Swift and Lady Gaga.

Pershing's SPAC announced Monday that its board had unanimously decided not to proceed with the purchase after discussions with the U.S. Securities and Exchange Commission.

"Our decision to seek an alternative initial business combination ("IBC") was driven by issues raised by the SEC with several elements of the proposed transaction – in particular, whether the structure of our IBC qualified under the NYSE rules," Ackman said in a letter to shareholders, published Monday.

Pershing Square said that in light of its experience with the proposed UMG deal, it will now be pursuing a "conventional" SPAC merger. It has 18 months to close a new transaction unless shareholders vote for an extension.

"While we are disappointed with this outcome, we continue to believe that the unique scale and favorable structure of PSTH will enable us to find a transaction that meets our standards for business quality, durable growth, and a fair price," Ackman said.

Pershing's share price has fallen 18% since the UMG purchase was announced on June 4, and Ackman said it had underestimated shareholders' reaction to the "complexity and structure" of the transaction.

Despite dropping the deal, Pershing insisted that Vivendi was not being "left at the altar," and reiterated that it still intends to become a long-term shareholder of UMG after its public listing on the Euronext Amsterdam in September.

Vivendi announced in a statement Monday that it had approved a request from Pershing to assign the rights to purchase 10% of UMG's share capital to "investment funds with significant economic interests or management positions held by Mr. William Ackman."

"The equity interest eventually acquired in UMG will now be comprised between 5 and 10%. If it were less than 10%, Vivendi still intends to sell the shortfall to other investors before the distribution of 60% of the share capital of UMG to the shareholders of Vivendi scheduled to occur on September 21, 2021," the company added.

Ackman told CNBC exclusively on Monday that the SEC first approached his firm to express concern that the new entity being created as part of the deal would become an investment company.

"In order to address the SEC's concern, we changed the structure of the deal to provide that we were going to contribute the stock that we purchased to a trust — we thought that would address the issue," Ackman explained.

"Then we signed the deal, and then we pushed forward with the transaction, and then actually this week, in the last few days, the SEC raised, I would say, a 'deal killer,' which is they said that in their view, the transaction didn't meet the New York Stock Exchange SPAC rules."

He added that this call from the regulator was a "dagger in the heart of the transaction" and put Tontine in a "very awkward spot."

Ackman's main investment vehicle Pershing Square Holdings will now take on the stake. He expressed frustration at the SEC's objections and urged PSTH shareholders to complain to the regulator directly.

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Bill Ackman rejigs Universal deal after regulators probe SPAC plan

Yahoo Finance 19 July, 2021 - 01:18am

PARIS (Reuters) -Billionaire investor Bill Ackman will buy up to 10% of Vivendi's Universal Music Group through his main hedge fund, rather than a special purpose acquisition company (SPAC), after investors and regulators questioned his use of a SPAC.

The investment comes ahead of a plan to list and spin-off 60% of Universal to Vivendi shareholders, as the French group, controlled by tycoon Vincent Bollore, cashes in on the streaming boom and the lure of stars such as Taylor Swift.

The transaction has attracted big investors including China's Tencent, but Ackman's decision to use a SPAC to buy a minority stake raised eyebrows from the get go, after deviating from the usual investment pattern for such vehicles.

Helped by easy monetary conditions, Wall Street and European markets have experienced a boom in these so-called blank cheque companies, designed to snap up entire private firms and take them public without the more onerous rules attached to listings.

Pershing Square Tontine Holdings (PSTH), Ackman's SPAC, said in a statement the U.S. Securities and Exchange Commission (SEC) had raised issues with several elements of the deal, without disclosing them.

Some investors had also queried the transaction, with PSTH shares falling 18% since it was announced, despite Universal's appeal. Ackman had described Universal as an "incredibly iconic, super durable business", and his investment had valued the music label group at 35 billion euros ($41 billion) including debt.

"We underestimated the reaction that some of our shareholders would have to the transaction's complexity and structure," Ackman said in a PSTH release.

Pershing Square, Ackman's main hedge fund, will now replace PSTH as the investor.

"Our counterparty was not left at the altar," Ackman added.

The overhaul is a blow to the biggest ever SPAC, after PSTH raised $4 billion in an initial public offering (IPO) last summer. It said it now had 18 months to find another target, or it has to return funds to its investors.

Amid the SPAC deal frenzy, the SEC has begun to probe several aspects of the vehicles, including the way they are marketed and project growth forecasts, and potential conflicts of interest among their advisers.

Jefferies analysts said the $4 billion Universal investment would be a big outlay for Ackman's main Pershing Square fund, but could be co-financed.

Ackman has revealed a personal motivation for supporting Universal too, linked to his songwriting grandfather, Herman Ackman, who sold lyrics that are now owned by the music group.

Vivendi said in a separate statement that Pershing Square's investment would likely amount to between 5% and 10% of Universal's capital, adding it would open it up to other investors to make up the shortfall were it less than 10%.

(Reporting by Sudip Kar-Gupta, Sarah White and Mathieu RosemainEditing by Edmund Blair and Mark Potter)

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Billionaire Bill Ackman is walking away from a deal announced last month that would have given him a 10% stake in Universal Music Group, the label that is home to Taylor Swift, Billie Eilish, Lady Gaga, and the Beatles. In a letter Monday to shareholders of his investment fund, Pershing Square, Ackman cited questions from the Securities and Exchange Commission about whether the structure of a special-purpose acquisition company would allow such an acquisition under the rules of the New York Stock Exchange. Vivendi SA last month confirmed that its Universal Music Group was in talks to sell a 10% stake to Pershing's special-purpose acquisition company, or SPAC, in a deal that would value the record label at about $40 billion.

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