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Vivendi Sells 10 Percent Stake in Universal Music Group to Bill Ackman’s Pershing Square

Universal Music Group in Santa Monica,
Michael Buckner for Variety

Vivendi has reached a deal with Bill Ackman’s Pershing Square to sell a 10% stake in Universal Music Group, a transaction that values the world’s largest music company at $40 billion.

In Vivendi’s announcement, which came at the strange hour of 2 p.m. ET on Fathers Day, apparently to capture a time when the global stock markets are closed, the company said the agreement would be finalized no later than Sept. 15. UMG is headed for an IPO later this year.

Ackman, a hedge fund billionaire, announced nearly a year ago his interest in aligning with a corporation of such size for his SPAC known as Pershing Square Tontine Holdings. The discussions place the valuation of UMG — home to Lady Gaga, Taylor Swift and Drake, among many others — at $40 billion. Should the deal close, which would take a few weeks, according to an insider who confirmed the talks were ongoing, the complicated agreement would mark the biggest SPAC transaction to date, per the Wall Street Journal, which first reported the news.

In a note to UMG staff on Sunday, chairman/CEO Lucian Grainge wrote: “This investment represents a strong validation of UMG, our strategy, our people, our legendary catalog and our amazing roster of artists and songwriters. And the fact that we now have, in addition to Vivendi, two committed investors—the consortium led by Tencent, as well as [Pershing Square Tontine] — is as powerful an endorsement as one could imagine from the investment and technology communities.”

Vivendi had previously announced that UMG would be spun off as a standalone entity to trade on Euronext after Vivendi distributes 60% of UMG to its shareholders by September. Additionally, China’s Tencent acquired 20% of UMG, leaving 20% to Vivendi, to which it was considering selling half, as reported by Variety on May 18.

Pershing Square also owns stakes in Chipotle, Domino’s Pizza, the Lowe’s home improvement chain and Hilton Hotels but had not previously held any other media or entertainment properties.

UMG was valued at a whopping $53 billion — up from $36 billion last year — last month in Goldman Sachs’ annual “Music in the Air” study and is widely recognized in the music industry as an optimistic but authoritative survey of the business, demonstrating the perceived strength of the recorded-music and publishing businesses.

In Vivendi’s earnings report last month, UMG’s revenues were up 9.4%  thanks to the growth in subscription and streaming revenues (which was up 19.6%). Recorded music revenues grew by 10.8%, while physical sales were up 14.8%, driven by bigger sales of new release and catalog titles.

New releases from Justin Bieber and Olivia Rodrigo, as well as continued sales from The Weeknd, Ariana Grande and Pop Smoke, were among the most consumed for the first quarter of 2021, boosting the recorded music and publishing units’ bottom line. The cancellation of touring for much of 2020 and into 2021, however, did have an impact on merchandising and other revenues, which were down 10.0%.