The hedge fund billionaire Bill Ackman is nearing a deal with Universal Music Group that would see his blank-cheque company acquire a 10 per cent stake in the record label behind artists such as Lady Gaga and Cyndi Lauper, said people briefed on the matter.
The deal with Pershing Square Tontine Holdings, which broke records with its $4bn listing last year, will value Universal at about $40bn.
Shares in Ackman’s New York Stock Exchange-listed company fell as much as 14 per cent in after-hours trading, as investors reacted negatively to news of the transaction.
Ackman’s special purpose acquisition company, or Spac, is working with his advisers to finalise the terms of the deal, which could take days or weeks to close, said people briefed about the matter.
Last month Vivendi said it was considering selling an additional 10 per cent stake in Universal Music to an unnamed US investor. The French media group, controlled by the billionaire Vincent Bolloré, has previously sold 20 per cent of Universal to China’s Tencent.
The dealmaking comes as Vivendi is looking to squeeze money out of Universal Music, its prized asset which has benefited from the revival of the music business. Universal, home to acts including The Beatles, Drake and Taylor Swift, is the world’s largest record label, commanding an almost 30 per cent share of the market, according to Midia Research Research estimates.
Ackman hinted last month that he could be announcing a deal in the next few weeks. The investor said he had been working on the transaction since early November, adding that he was “deeply engaged” with an “iconic, phenomenal, great business”. Ackman said at the time that there was a lot of complexity involved in the deal.
The value of music companies has soared in recent years as audio streaming services such as Spotify resuscitated the ailing business, sending billions of dollars of royalty payments to record labels including Universal. In 2013 SoftBank offered to buy Universal Music for only €6.5bn.