Universal Music Group Confirms 'Unsolicited' Takeover Bid from Pershing Square Capital Management

Universal Music Group has confirmed it received an "unsolicited and non-binding" takeover bid from Bill Ackman's Pershing Square Capital Management.

Reported earlier this week, the offer includes about US$10.9 billion in cash, plus additional stock that pushes the total consideration to about US$35 a share. The Wall Street Journal pegged the total value of the offer at more than US$63 billion (AU$89 billion).

Per Variety, Pershing Square said that UMG’s stock has been undervalued because of uncertainty around the company’s ownership structure and around UMG’s stake in Spotify, and by the company’s delay of its planned stock listing in the US. Ackman previously struck an agreement with the company last year to establish a secondary listing in the US in addition to its primary home on the Euronext Amsterdam listing.

"The Board of Directors, together with its advisors, will review the proposal in accordance with its fiduciary duties and analyse its implications for shareholders, employees, artists, songwriters and other stakeholders," Universal Music Group said in a statement.

"The Board of Directors has complete confidence in UMG’s strategy and the leadership of Sir Lucian Grainge and the Company’s management team.

"UMG will have no further comment on the proposal until the Board of Directors completes its review."

Ackman, who has been sparring with UMG management since he acquired 10% of UMG in a deal with Vivendi in 2021, asserted that “all transaction equity financing will be backstopped by Pershing Square and affiliates, and all debt financing will be committed at signing" in a statement earlier this week.

Pershing Square’s statement included a bullet point list of reasons why UMG’s board should embrace the takeover offer, including “uncertainty concerning the Bolloré Group’s 18% stake in the company”, what it described as the “underutilisation of UMG’s balance sheet, which has led to reduced returns on equity” and “the absence of a publicly disclosed capital allocation plan and earnings algorithm".