Why is Ackman’s SPAC no longer buying 10 percent of Universal?

Ackman’s investment firm, Pershing Square Holdings, will now take a stake in Universal Music Group instead of the SPAC transaction that was initially agreed on.  

On Monday, 19 July 2021, William Ackman announced that his special-purpose acquisition company (SPAC) would no longer be continuing with the deal with the Universal Music Group, that would reportedly value the music business at $40 billion. Instead of the SPAC, Ackman’s investment firm, Pershing Square Holdings Limited, will reportedly take a stake in Universal and become a long-term investor in the company.

This announcement comes after Ackman announced on Friday, 4 June 2021, that his SPAC had agreed to buy a 10 percent stake in French media conglomerate, Vivendi SE, Universal Music Group for approximately $4 billion. The deal would have reportedly taken Vivendi public.

According to Ackman, the decision to seek an alternative initial business combination (IBC) was driven by issues that were raised by the United States (US) Securities and Exchange Commission (SEC) about several elements of the SPAC transaction. The SEC reportedly questioned whether the structure of the IBC qualified under the New York Stock Exchange rules. The board reportedly unanimously decided not to proceed with the transaction after the SEC report.

Shareholders were reportedly not happy with the complexity of the structure, and Pershing’s share price dropped by 18 percent since the announcement of the purchase in June. Ackman reportedly added that the company was disappointed with the outcome of the transaction, but believes that Pershing’s favourable structure would enable the two companies to find a transaction that meets the standards for business quality, durability, and fair price.

Pershing reportedly reiterated that it still intends to become a long-term shareholder of Universal, after its public listing on the Euronext Amsterdam in September. The company reportedly added that the new transaction means that the equity interest acquired by Universal will now be comprised between five and 10 percent.