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Bill Ackman’s Pershing Square Tontine Backs Out of UMG Deal

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Bill Ackman’s Pershing Square Tontine PSTH will no longer be acquiring 10% of Universal Music Group UMG. Instead, the Pershing Square Holdings hedge fund which also belongs to Bill Ackman will be making the purchase.

PSTH informed its shareholders that its board of directors unanimously determined not to proceed with the Universal Music Group transaction, and to assign their 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 their UMG transaction costs.

Pershing Square Tontine cited problems with the SEC over “several elements of the proposed transaction – in particular, whether the structure of our IBC qualified under the NYSE rules,” as the reason for this decision. The firm says that they had multiple discussions with the SEC attempting to change its position on the issues that the SEC 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),” stated PSTH, “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.”

In June, Bill Ackman’s Pershing Square Tontine Holdings (PSTH) confirmed that it was in discussions with Vivendi S.E. (“Vivendi”) to acquire 10% of the outstanding Ordinary Shares of Universal Music Group B.V. (“UMG”) for approximately $4 billion. Such an acquisition would leave Universal Music Group with a valuation of $42.4 billion, said Pershing Square in a statement at the time.

PSTH now says that its share price fell by 18% since the transaction was first announced on June 4th. The firm explained that, “While we believe our shareholders recognize UMG’s extraordinary attributes including its attractive growth characteristics, business quality, and superb management team, we underestimated the reaction that some of our shareholders would have to the transaction’s complexity and structure. We also underestimated the transaction’s potential impact on investors who are unable to hold foreign securities, who margin their shares, or who own call options on our stock.”

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