Bill Ackman's SPAC To Buy 10% Stake In Universal Music Group From Vivendi In $4B Deal

Pershing Square Tontine Holdings PSTH, a blank-check firm owned by billionaire investor William Ackman said on Sunday it is buying 10% of Universal Music Group, a unit of Vivendi SE VIVHY, for about $4 billion.

What Happened: Universal Music Group, which is home to artists such as Taylor Swift and Lady Gaga, is being listed on the Euronext Amsterdam in the third quarter this year in a planned spinoff from the French media conglomerate Vivendi. Under the terms of the deal, once the listing is complete, PSTH shareholders will receive UMG shares.

After the $4 billion purchase of the 10% stake in UMG, PSTH will continue to exist and still have access to around $2.9 billion in cash with which Ackman plans to pursue another deal.

See Also: Bill Ackman SPAC Announces Universal Music Deal: Could Investors See A #1 Hit?

Why It Matters: The billionaire will create a new special purpose acquisition rights company, or a SPARC, which is expected to trade on the NYSE or Nasdaq, and will allow holders to subscribe for SPARC shares once it finds its initial business combination partner, the company said.

Unlike a SPAC, a SPARC does not intend to raise capital through an underwritten IPO in which investors commit capital upfront – before knowing the company with which it will combine.

Assuming all of the SPARC Warrants are exercised, it will have a minimum of $6.6 billion of cash and access to up to $10.6 billion to complete a deal.

Price Action: PSTH shares closed marginally down at $22.70 on Friday. 

Photo by Tony Webster on Flickr