Vivendi has agreed to sell 10 per cent of Universal Music Group (UMG) to US-based special purpose acquisition company (SPAC), Pershing Square Tontine Holdings (PSTH).
The European media giant, which is the parent company of UMG and owner of See Tickets, Digitick and Paylogic, confirmed the 10 per cent sale of outstanding ordinary shares in UMG for approximately $4bn – valuing the world’s largest music company at about $40bn.
PSTH has purchased the minority stake ahead of UMG’s planned listing of its music division on the Dutch stock exchange later this year, with the Netherlands being one of UMG’s historical homes.
UMG will become a standalone business listed on the Euronext stock exchange in Amsterdam after Vivendi distributes 60 per cent of the shares in UMG to its current shareholders. The listing will be completed by September 27 “at the latest.”
A consortium led by Chinese internet giant Tencent Holdings also owns 20 per cent of UMG, with Vivendi to control 10 per cent of the standalone firm once it is listed.
In an email to UMG employees, reported by Market Watch, chief executive Lucian Grainge, said: “The fact that we now have, in addition to Vivendi, two committed investors — the consortium led by Tencent, as well as PSTH — is as powerful an endorsement as one could imagine from the investment and technology communities.”
PSTH is a SPAC or blank cheque company, which is a shell corporation listed on a stock exchange with the purpose of acquiring a private company, thus making it public without going through the traditional initial public offering process. SPACs usually buy companies outright, so PSTH’s deal to buy 10 per cent of UMG is unusual.
PSTH told its shareholders, according to Music Business Worldwide: “During the course of our negotiations with Vivendi, it became clear that various tax, legal and other strategic considerations precluded Vivendi from entering into a “traditional” de-SPAC merger transaction, and from selling more than 10 per cent of UMG.
“Even with the additional complexity, time, legal, and other costs that these constraints created, we were convinced that the opportunity to acquire such an extraordinary business was the best option for our shareholders.
“Fundamental to that decision was the fact that the UMG transaction on its own provides all of the same benefits and protections to our shareholders that they would have received in a more traditionally structured de-SPAC merger and share distribution.”
After UMG goes public, PSTH shareholders will continue to own shares in the SPAC, which will continue to exist, with approximately $1.5bn in cash and access to an additional $1.4bn of cash through forward purchase agreements.