Bill Ackmans Pershing Square Capital Management unveiled a non-binding proposal to the board of directors of music giant Universal Music Group (UMG), the musical home of such stars as Taylor Swift and Kendrick Lamar, to acquire all of its outstanding shares in a mega-transaction valued at around $63.5 billion, together with a value creation plan designed to deliver significant benefits to UMG stakeholders.

Pershing, which has owned a stake in the music major since 2021, said its offer values each share of UMG at 30.40, putting the total value of UMG under the overall deal at about 55 billion, or $63.5 billion. Since UMGs [stock market] listing, [UMG chairman and CEO] Sir Lucian Grainge and the companys management have done an excellent job nurturing and continuing to build a world-class artist roster and generating strong business performance, said Pershing Square CEO Bill Ackman. However, UMGs stock price has languished due to a combination of issues that are unrelated to the performance of its music business and importantly, all of them can be addressed with this transaction.

Pershing Square said it believes that UMGs stock price underperformance is principally due to the following factors: Uncertainty concerning the Bollor Groups 18 percent stake in the company, the postponement of UMGs U.S. [stock market] listing, the underutilization of UMGs balance sheet, which has led to reduced returns on equity, the absence of a publicly disclosed capital allocation plan and earnings algorithm, the lack of investor credit in UMGs valuation for its 2.7 billion ($3.1 billion0 stake in Spotify, suboptimal shareholder investor relations, communications, and engagement.

In the proposed transaction, UMG would merge with Pershing Square SPARC Holdings, and the newly merged company will become a Nevada corporation listed on the New York Stock Exchange. We expect the transaction to close by year-end, the firm said. Shareholders will receive a total of 9.4 billion in cash (or 5.05 per share) and 0.77 shares of New UMG stock for each share of UMG held. New UMG will publish financial statements under U.S. GAAP and be eligible for SP 500 and other index inclusion. The transaction will enable the cancellation of 17 percent of UMG outstanding shares while preserving the companys investment-grade balance sheet and its long-term financial and strategic flexibility.

All equity financing will be backstopped by Pershing Square and its affiliates, with all debt financing to be committed at signing.