Bill Ackman's Pershing Square dropped the deal to buy 10% of Universal Music

July 21, 2021: -On Monday, billionaire investor Bill Ackman’s blank-check company Pershing Square Tontine Holdings said it had dropped a deal to purchase 10% of Vivendi’s flagship Universal Music Group.

The previous month, Ackman’s SPAC agreed to buy 10% of the French media group’s crown jewel for around $4 billion.

Recently, Vivendi shareholders backed the spin-off of Universal, which gave the company an enterprise value of 35 billion euros. The music corporation is home to stars which includes Taylor Swift and Lady Gaga.

However, On Monday, Pershing announced that its board had unanimously decided not to go ahead with the purchase after discussions with the U.S. Securities and Exchange Commission (SEC).

“Our decision to seek an alternative initial business combination (IBC) was driven by issues that were raised by the SEC with a few elements of the proposed transaction if the structure of our IBC qualified under the NYSE rules,” Ackman said in a letter published on Monday to the shareholders.

Pershing Square said that in light of its experience with the proposed UMG deal, it would pursue a “conventional” SPAC merger. It has got 18 months to close a new transaction unless shareholders voted for an extension.

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

The share price of Pershing has decreased 18% since the UMG purchase was announced on June 4, and Ackman added that it had underestimated shareholders’ reaction to the “complexity and structure” of the transaction.

Despite the drop of the deal, Pershing insisted that Vivendi was not being “left at the altar” and reiterated that it still intends to be 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.