Universal Music’s board has rejected billionaire Bill Ackman’s takeover proposal, arguing it “materially undervalues” the company and is ultimately not in the best interest of shareholders or artists.
The company’s board unanimously rejected the $65bn (£48.3bn) proposal from Ackman’s Pershing Square Capital on Friday, as it offered to buy the world’s largest record company last month.
Pershing Square proposed a cash and stock offer through its acquisition vehicle, valuing the company at roughly €30.4 (£26.3) per share.
The deal would have merged Universal with a blank-cheque company.
In a statement on Friday, Universal said: “The board has rejected the proposal because it fundamentally and materially undervalues UMG and will not deliver superior value creation.
“The Board has heard from many of UMG’s shareholders and other stakeholders and believes there is a strong consensus supporting the Board’s decision.”
Universal’s largest individual shareholder, Bollore, also urged the board to reject Ackman’s offer.
The company, which is linked to artists such as Taylor Swift and Kendrick Lamar, also noted recent plans to expand its share buyback programme and sell half of its stake to streaming giant Spotify, which remain “under continuous review”.
Universal struggles
But the company has seen its shares struggle in recent years, falling behind the broader market, with the group’s share price down over 20 per cent in the last year.
Ackman argued moving its listing from Amsterdam to New York would help boost its value, with Pershing also wanting the group to dispose of its entire Spotify holding, which is valued at about £1.3bn.
Despite listing in 2021, Ackman told investors that Universal had “never graduated from being a private company”.
He said: “Since UMG’s listing, Sir Lucian Grainge and the company’s management have done an excellent job nurturing and continuing to build a world-class artist roster and generating strong business performance.
“However, UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business and importantly, all of them can be addressed with this transaction.”
Ackman’s proposal would have required the approval of two-thirds of Universal’s shareholders voting at a meeting, with the hedge fund manager last month saying he was confident of securing the needed support.
But the decision of Bollore to urge the board to reject dealt a swift blow to Ackman’s plans, with chief executive Cyrille Bollore, saying he did not think the deal would “be positive for the company”.
Looking forward
Sir Lucian Grainge, chairman and chief executive of Universal Music Group, said: We remain committed to leading the industry by attracting the world’s top talent, deepening fan engagement globally, and driving innovation.
“As we execute our strategy and deliver maximum long term value, we look forward to providing shareholders with greater insight into the drivers of our performance and future direction of our business.”
Pershing Square holdings took a 10 per cent stake in UMG in 2021, shortly before it floated in Amsterdam with a €46bn valuation, with Ackman serving on the board until last year.
Pershing Square was contacted for comment.
