Investor Drops SPAC Deal to Buy 10 Percent Of UMG

Billionaire investor Bill Ackman’s blank-check company Pershing Square Tontine Holdings said Monday it had dropped a deal to buy 10% of Vivendi’s flagship Universal Music Group, reports CNBC.

Ackman’s SPAC last month agreed to buy 10% of the French media group’s crown jewel for around $4 billion.

Vivendi shareholders recently backed the spin-off of Universal which gave the company an enterprise value of 35 billion euros ($41.55 billion). The music corporation is home to stars including Taylor Swift and Lady Gaga.

However, Pershing announced Monday that its board had unanimously decided not to proceed with the purchase after discussions with the U.S. Securities and Exchange Commission (SEC).

“Our decision to seek an alternative initial business combination (“IBC”) was driven by issues raised by the SEC with several elements of the proposed transaction – in particular, whether the structure of our IBC qualified under the NYSE rules,” Ackman said in a letter to shareholders, published Monday.

Pershing Square said that in light of its experience with the proposed UMG deal, it would now be pursuing a “conventional” SPAC merger. It has 18 months to close a new transaction unless shareholders vote for an extension.

“While we are disappointed with this outcome, we continue to believe that the unique scale and favorable structure of PSTH will enable us to find a transaction that meets our standards for business quality, durable growth, and a fair price,” Ackman said.

Pershing’s share price has fallen 18% since the UMG purchase was announced on June 4, and Ackman said it had underestimated shareholders’ reaction to the “complexity and structure” of the transaction.

Despite dropping the deal, Pershing insisted that Vivendi was not being “left at the altar,” and reiterated that it still intends to become a long-term shareholder of UMG after its public listing on the Euronext Amsterdam in September.