Bill Ackman's SPAC Abandons Universal Music Group Deal Over SEC Objections

Billionaire investor Bill Ackman's SPAC Pershing Square Tontine Holdings PSTH said on Monday it is no longer pursuing a deal to buy 10% of Universal Music Group, a unit of Vivendi SE VIVHY.

What Happened: Ackman-led special purpose acquisition company had last month said it was buying the 10% stake in Universal for about $4 billion, creating a new special purpose acquisition rights company, or a SPARC, which was expected to trade on the NYSE or Nasdaq.

Pershing said it had decided to withdraw the deal talks after the U.S. Securities and Exchange Commission (SEC) raised issues related to several elements, especially whether the structure of the business combination qualified under the NYSE rules.

See Also: Bill Ackman SPAC Deal For Universal Music Group Could Face Battle From Dan Loeb, Among Others

“We and our counsel had multiple discussions with the SEC attempting to change its position on the issues that it had identified,” Ackman said, adding that the company’s next deal will be a conventional SPAC merger.

Why It Matters: Ackman’s complicated SPARC deal failed to woo the SEC. 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.

Universal Music Group, which owns the rights to music from artists such as Taylor Swift and Lady Gaga, will become a public company when it is listed on Euronext Amsterdam in September.

Ackman said in a statement that "none of us anticipated this outcome" but Vivendi will not be "left at the altar" as a result of this fallout.

"Pershing Square will be fulfilling PSTH’s commitment to Vivendi," the billionaire said, adding that the firm still intends to be a long-term shareholder in UMG.

Price Action: PSTH shares closed 1.76% lower at $20.63 on Friday.

Photo by Tony Webster on Flickr