Vivendi has agreed to sell 10% of Universal Music to a so-called blank check company backed by hedge fund billionaire Bill Ackman for about $4 billion.
The deal was confirmed by Vivendi and Pershing Square Tontine Holdings, Ackman’s special purpose acquisition company (SPAC), in statements on Sunday. SPACs typically raise money from investors before going on a hunt for takeover targets.
Universal Music Group (UMG) claims to have the rights to the world’s largest collection of music, and is home to stars such as Kanye West, Taylor Swift, Ariana Grande, Billie Eilish and Justin Bieber.
Discussions between the SPAC and Vivendi were initially announced earlier this month. The French media giant said Sunday that it expects the deal to close no later than September 15.
When finalized, the complex agreement would mark the biggest SPAC transaction to date, according to the Wall Street Journal, which first reported news of the deal.
This is the second big investment in UMG in recent months. A group of investors led by Chinese streaming giant Tencent Music bought a 20% stake late last year.
“After the 20% equity stake acquired by the consortium led by the Tencent group, the arrival of major American investors provides further evidence of UMG’s global success and attractiveness,” Vivendi said Sunday.
In its statement, Ackman’s SPAC highlighted UMG’s “strategic attributes and competitive advantages” including “predictable, recurring revenue streams that require minimal capital despite high growth.”
It added that it believes “global consumer adoption of streaming will generate many years of high growth.”
New releases from Justin Bieber, as well as sales from The Weeknd, Ariana Grande and Pop Smoke helped boost UMG revenue in the first quarter of this year, up 9.4% compared to 2020. First quarter earnings published by Vivendi also stated that the cancellation of touring for much of 2020 and into 2021 was hurting merchandising and other revenues, which were down 10% in the quarter.
The transaction comes ahead of Vivendi’s plans to spin off UMG via a listing on the Amsterdam stock exchange in late September. Vivendi’s investors will receive 60% of Universal’s shares.