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Universal Music Group

Bill Ackerman’s SPAC Plan For Universal Acquisition Unravels

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(CelebrityAccess) — Private equity investor William Ackman has backed away from a plan to use a Special Purpose Acquisition Company to take a stake in Universal Music Group after the deal was scrutinized by the Securities And Exchange Commission.

Instead, Ackman said that his investment form Pershing Square Holdings will become a long-term investor in the UMG.

In a statement, a spokesperson for Pershing Square said:

Yesterday, our board of directors unanimously determined not to proceed with the Universal Music Group transaction, and to assign our share purchase agreement to Pershing Square Holdings, Ltd. (LN:PSH) (LN:PSHD) (NA:PSH) and affiliates (“PSH and affiliates” or “Pershing Square”). Pershing Square has also agreed to assume the Vivendi indemnity agreement and our UMG transaction costs.

In light of these developments, PSTH is withdrawing its Redemption Tender Offer and related Warrant Exchange Offer.

Our decision to seek an alternative initial business combination (“IBC”) was driven by issues raised by the SEC with several elements of the proposed transaction – in particular, whether the structure of our IBC qualified under the NYSE rules.

We and our counsel had multiple discussions with the SEC attempting to change its position on the issues that it had identified. Ultimately, our board concluded that it was in the best interest of shareholders to assign the UMG stock purchase agreement to Pershing Square (which is specifically permitted under the terms of the agreement with Vivendi) as it did not believe PSTH would be able to consummate the transaction in light of the SEC’s position. Management and the board believe that greater shareholder value can be created by working expeditiously to identify a new merger partner.

PSTH has 18 months remaining to close a new transaction unless extended by the vote of our shareholders. In light of our recent experience, our next business combination will be structured as a conventional SPAC merger.

While we are disappointed with this outcome, we continue to believe that the unique scale and favorable structure of PSTH will enable us to find a transaction that meets our standards for business quality, durable growth, and a fair price. We are highly economically and reputationally motivated to consummate a successful transaction. We will, however, only complete a deal that meets our high standards.

Ackman and his SPAC Pershing Square Tontine Holdings Ltd. announced in June plans to acquire a 10% stake of UMG from French media giant Vivendi for $4 billion.

While most acquisitions involving SPACs see a company merging with an already listed blank check company to take it public, Ackman’s UMG deal was structured differently, with Pershing Square Tontine planned to become an investor ahead of an already planned public listing of Universal on a European exchange.

The use of SPACs, or so-called ‘blank check companies’ has become increasingly common as a way to take a company public while avoiding the more regulated traditional public offering process. Because SPACs are publicly registered, they allow the general public to buy and trade shares ahead of a merger or acquisition but do not require the same levels of public disclosure.

In 2020 alone, SPACs raised a record of $82 billion, according to the Wall Street Journal. However, the business model has come under increased scrutiny from the SEC in recent months over concerns potential risks for small investors.

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