The cancellation of the operation with Universal Music raises doubts for the future
Billionaire Bill Ackman has a problem, after his $ 4 billion SPAC canceled the purchase of 10% of Universal Music on Monday.
Ackman first unveiled the convoluted deal with Universal’s parent Vivendi in early June. First, the hedge fund London-listed Pershing Square Holdings and its subsidiaries would contribute 1.6 billion to SPAC, Pershing Square Tontine Holdings. This would raise its cash to 5,600 million. It would then spend $ 4.1 billion to purchase a tenth of the record company, including transaction costs, and deliver those shares directly to SPAC investors after Vivendi completed its own 60% divestiture of Universal. The SPAC would then have $ 1.5 billion in cash for a future operation, and its holders would also receive a free negotiable right to participate in other Ackman SPACs.
This complexity appears to have raised eyebrows at the SEC, which questioned whether it was eligible. At the very least, the transaction could be delayed. That’s why Ackman said Monday that his fund, and not SPAC, would buy Universal’s shares. Vivendi comes out practically unscathed. Majority shareholder Vincent Bolloré is likely to be able to sell a large chunk of the original 10% stake to Ackman, and he should have no trouble finding other investors to make up any shortfalls.
For fans of Ackman’s SPAC, the picture is more mixed. On the one hand, shareholders dodge a transaction that they did not like very much already before Monday. The main disadvantages were their complexity and the fact that they could buy Vivendi shares directly.
Ackman has returned to the starting box after a resounding failure. That raises questions going forward about speed and certainty, which are the main benefits of going public through a SPAC. Despite Ackman’s relatively investor-friendly fee structure, the manager and his patrons could end up singing the blues.