PARIS — American hedge fund Pershing Square, led by the activist investor Bill Ackman, announced Tuesday that it had offered to buy Universal Music Group in a merger, saying it believed the music giant was undervalued by stock markets.
Pershing Square said its cash and stock offer to Universal shareholders was worth €30.40 (US$35.15) a share, valuing Universal with its stable of top artists including Taylor Swift, The Weeknd and Lady Gaga at around €55 billion.
Pershing Square said in a statement that it had submitted the offer to Universal's board, hoping to close the deal by the end of 2026.
After a merger with Pershing Square SPARC Holdings, an acquisition company, the new entity would be listed on the New York Stock Exchange.
"UMG's stock price has languished due to a combination of issues that are unrelated to the performance of its music business," Ackman said in a statement.
The company pointed to uncertainty about French conglomerate Bollore's plans for its 18% stake in Universal, a delay in listing on the US stock market, and "underutilisation of UMG's balance sheet" among concerns that have held back the shares' performance.
Pershing Square bought 10% of UMG from the French media giant Vivendi, also owned by Bollore, in August 2021.
If the merger goes ahead, the new company would aim to increase its dividend payouts by 2% each year and maintain borrowing of 2.5 times its operating profit (EBITDA), Pershing Square said in a letter to Universal's Board.
"All free cash flow after required investments in the business will be used for share repurchases," the letter added.
Universal shares were up on the Amsterdam stock exchange following news of the offer, adding more than 11% to trade at just over €19 around 0950 GMT.
