(Bloomberg) – Bill Ackman will buy a stake in Universal Music Group with his hedge fund instead of his blank check company after opposition from US investors and regulators.
Ackman’s special-purpose acquisition company will withdraw its offer for a 10% stake, it said in a letter Monday. His hedge fund will take over the share purchase agreement and buy 5-10% of the music label, UMG owner Vivendi SE said in a separate statement.
The decision comes as the SPAC boom dies down, with the IPOX SPAC index falling 26% from its peak in February. The complexity of the deal may have been too much for the shareholders of SPAC, Pershing Square Tontine Holdings Ltd. The blank check company’s stock price has plummeted 18% since the deal negotiations were announced on 4 May. June.
The vehicle had planned to distribute Universal Music’s shares to its investors after a public listing of the music business in Amsterdam later this year. Investors would also have obtained the right to acquire a stake in a new vehicle known as a special purpose acquisition rights company, or SPARC. The deal would have effectively reduced the size of Ackman’s SPAC, allowing it to pursue smaller goals.
The original deal would have valued the home of Taylor Swift, Drake and Billie Eilish at 35 billion euros ($ 41.3 billion), including debt.
“It was an unfortunate transaction doomed and it did,” said Bluebell Capital Partners chief investment officer Giuseppe Bivona, who had launched an activist campaign against the company earlier this year and still owns shares in Vivendi.
“We don’t know much at this stage, but it doesn’t seem to be just the change in the entities. It is unclear if Pershing Square is buying the full 10%. “
Ackman said he had not anticipated shareholder reaction to the structure of the deal and its “potential impact on investors who cannot hold foreign securities, who have margin for their shares or who have call options on our shares.”
The SPAC now has 18 months to close a new deal under its current shareholders agreement.
Vivendi shares fell 1.9% as of 2:48 pm in Paris trading.
Pershing Square Tontine said that while he had multiple discussions with the US Securities and Exchange Commission to try to address the regulator’s concerns, he “did not believe that PSTH could consummate the transaction.”
The regulator was particularly concerned that the structure of the deal would not qualify by the rules of the New York Stock Exchange.
The SEC raised “deal killer” concerns last week and “stopped” the deal, Ackman said in an interview with CNBC. Ackman said that upset holders of the blank check company should complain to the SEC.
Pershing Square Tontine will go and make a “very straightforward” merger deal, Ackman told CNBC.
Pershing Square Holdings Ltd., Ackman’s hedge fund, will not leave Vivendi “on the altar” and will take on a severance agreement with Vivendi and transaction costs, the manager of the billionaire fund said in the letter. The hedge fund is intended to be a “long-term UMG shareholder”.