Wall Street billionaire Bill Ackman’s Pershing Square has purchased a 7.1% stake in Universal Music from French media conglomerate Vivendi for $2.8 billion or $21.78 per share and intends to raise its stake to as much as 10% next month.
As Shares explained here, the exciting transaction gives shareholders in London-listed fund Pershing Square (PSH) exposure to the earnings of the music corporation which stars including Lady Gaga and Taylor Swift call home.
GOING GAGA FOR UMG
In a brief statement that sent the shares up 0.8% to £25.90, Pershing Square said the total cash consideration of $2.8 billion places a €33 billion equity value on Universal Music, one of the world’s big three record companies alongside Sony Music and Warner Music and expected to list on Euronext Amsterdam on 21 September.
Pershing Square plans to exercise its option to buy ‘up to an additional 2.9%’ of Universal Music’s shares at the same price per share by 9 September, giving investors in the FTSE 100-listed fund Pershing Square meaningful exposure to the music streaming boom.
WIDE DISCOUNT UNWARRANTED
Pershing Square was rewarded with promotion into the blue chip ranks in December 2020 after strong returns drove a meteoric share price rise.
The listed hedge fund’s investment focus is on large cap North American companies with the goal of preserving capital and generating superior long-term absolute returns, although Pershing Square has traded at a persistently wide NAV discount despite the strong portfolio and share price performance.
Shares believes there is scope for the 28% discount to narrow as awareness of the trust builds and investors grow ever more enthused by the stake in Universal Music.
