Ackman rejigs Universal Music deal after SEC probes Spac plan

Hedge fund founder will invest directly in business after investors also balked at deal structure

Vivendi plans to list and spin-off 60 per cent of Universal Music to shareholders, cashing  in on the streaming boom and the lure of stars such as Taylor Swift. Photograph:  Valerie Macon/AFP via Getty Images

Vivendi plans to list and spin-off 60 per cent of Universal Music to shareholders, cashing in on the streaming boom and the lure of stars such as Taylor Swift. Photograph: Valerie Macon/AFP via Getty Images

 

Billionaire investor Bill Ackman will buy up to 10 per cent 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 per cent 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 Mr Ackman’s decision to use a Spac to buy a minority stake raised eyebrows from the outset, after deviating from the usual investment pattern for such vehicles.

Helped by easy monetary conditions, Wall Street and European markets are 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.

SEC raises issues

Pershing Square Tontine Holdings (PSTH), Mr Ackman’s Spac, said in a statement the US 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 per cent since it was announced, despite Universal’s appeal. Mr Ackman had described Universal as an “incredibly iconic, super durable business”, and his investment had valued the music label group at €35 billion including debt.

“We underestimated the reaction that some of our shareholders would have to the transaction’s complexity and structure,” Mr 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,” Mr 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 Mr Ackman’s main Pershing Square fund, but could be co-financed.

Personal interest

Mr 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 per cent and 10 per cent of Universal’s capital, adding it would open it up to other investors to make up the shortfall were it less than 10 per cent. – Reuters