Pershing Square SPAC Merger Announcement Falls on Deaf Ears, Shares Fall 10%

William Ackman's SPAC, Pershing Square Tontine (NYSE: PSTH), announced its long-awaited merger target, and the news has been greeted with disappointment by investors.

Pershing Square Tontine confirmed that it is in discussions with Vivendi to acquire 10% of the outstanding shares of Universal Music Group B.V. for approximately $4 billion, representing an enterprise value of over $40 billion.

Ackman called Universal Music Group "one of the greatest businesses in the world."

“Led by Sir Lucian Grainge, it has one of the most outstanding management teams that I have ever encountered,” he continued. “Importantly, UMG meets all of our acquisition criteria and investment principles as it is the world’s leading music company, with a royalty on the growing global demand for music. We are delighted to work with Vivendi on this iconic transaction, and look forward to its consummation.”

The SPAC listed the following strategic attributes and competitive advantages:

• Number one industry market share in a stable competitive environment
• Iconic world-class management team
• Massive and growing total addressable market. Everyone loves music!
• Global consumer adoption of streaming will generate many years of high growth
• Irreplaceable owned IP and must-have content
• Predictable, recurring revenue streams that require minimal capital despite high growth
• Significant fixed-cost expense base allowing for long-term margin expansion
• Minimal financial leverage (<1x Net Debt / EBITDA)
• UMG will be the only uncontrolled, pure-play major music content company
• UMG will have an independent, high quality board of directors

PSTH shareholders will own three separately traded securities following the completion of the Transaction and the issuance of rights by SPARC:

1. their pro-rata share of UMG Ordinary Shares, which at cost, including transaction expenses, represents approximately $14.75 per PSTH share, before accounting for any dilution from PSTH Distributable Redeemable Warrants (the “Redeemable Warrants”);
2. their pro-rata share of PSTH after the distribution of the acquired UMG shares (“PSTH Remainco”), which will have approximately $5.25 in cash per share, before accounting for any dilution from PSTH Distributable Redeemable Warrants; and
3. one transferable five-year right per share (a “SPAR”) of Pershing Square SPARC Holdings, Ltd. (“SPARC”), which is expected to trade on the New York Stock Exchange.

Shares of Pershing Square Tontine are down 10% in pre-open trading.

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