Universal’s SPAC USD 4 billion deal falls apart after SEC intervenes

Universal’s SPAC USD 4 billion deal falls apart after SEC intervenes

Bill Ackman's special purpose acquisition company (SPAC), Pershing Square Tontine Holdings (PSTH), has reportedly abandoned a deal that would see his company buy a 10% stake in Universal Music Group (UMG) for USD 4 billion (£2.9 billion).

The Securities and Exchange Commission (SEC) of the United States froze the deal, claiming that acquiring 10% of a firm through a SPAC is not a proper SPAC transaction.

It is to be noted that New York Stock Exchange listed Pershing Square Tontine Holdings disclosed the deal last month on June 20. It planned to finalize the deal after UMG listed its 60% shares in Amsterdam in September.

However, the deal will go through in some form with the transfer of the UMG share purchase agreement to Pershing Square Holdings Ltd, a Guernsey-registered investment firm with over USD 9 billion in net assets as of the end of 2020.

For the record, Pershing Square Holdings is a closed-ended investment holding company separate to Ackman’s SPAC that primarily invests in assets domiciled in North America. Ackman's Pershing Square Capital Management, L.P. manages the fund's investments, cited knowledgeable sources.

A statement given to PSTH shareholders mentioned the board of directors unanimously decided not to continue with the UMG deal, and to allot their share purchase agreement to Pershing Square Holdings Ltd.

The SEC voiced concerns about various aspects of the planned deal, including whether the form of their initial business combination (IBC) qualified under the NYSE regulations, prompting them to seek an alternate IBC, it added.

The company stated it has had several meetings with the SEC to persuade it to change its mind, but it will instead seek a new merger partner.

The deal last month was reached with UMG's majority owner Vivendi, a French media behemoth, preparing to list UMG on the Euronext Amsterdam exchange, implying that Pershing owners would have received shares worth 10% of the music mogul.