PSTH to Distribute the Acquired UMG Shares
to PSTH Shareholders Later this Year
PSTH to Remain a Publicly Traded Company
with $1.5 billion of Cash After the Distribution of UMG Shares, and
to Seek New Business Combination Partner
Pershing Square Capital Management Has
Formed Pershing Square SPARC Holdings, Ltd. (“SPARC”)
SPARC to Distribute Transferable Rights to
Purchase Shares in SPARC to PSTH Shareholders
Pershing Square Tontine Holdings, Ltd. (NYSE:PSTH)
(“PSTH”), a special purpose
acquisition company, confirmed today that it is 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, representing an enterprise value of €35 billion for
UMG.
Later this year, after Vivendi completes its previously
announced listing of UMG on Euronext Amsterdam, PSTH plans to
distribute the acquired UMG shares to its shareholders.
The proposed transaction (the “Transaction”) is subject to the completion of
mutually satisfactory transaction documentation, but is not subject
to additional due diligence.
“Universal Music Group is one of the greatest businesses in the
world,” said Bill Ackman, CEO of PSTH. “Led by Sir Lucian Grainge,
it has one of the most outstanding management teams that I have
ever encountered,” he continued. “Importantly, UMG meets all of our
acquisition criteria and investment principles as it is the world’s
leading music company, with a royalty on the growing global demand
for music. We are delighted to work with Vivendi on this iconic
transaction, and look forward to its consummation.”
UMG has the following strategic attributes and competitive
advantages:
- Number one industry market share in a stable competitive
environment
- Iconic world-class management team
- Massive and growing total addressable market. Everyone loves
music!
- Global consumer adoption of streaming will generate many years
of high growth
- Irreplaceable owned IP and must-have content
- Predictable, recurring revenue streams that require minimal
capital despite high growth
- Significant fixed-cost expense base allowing for long-term
margin expansion
- Minimal financial leverage (<1x Net Debt / EBITDA)
- UMG will be the only uncontrolled, pure-play major music
content company
- UMG will have an independent, high quality board of
directors
Proposed Transaction
PSTH shareholders will own three separately traded securities
following the completion of the Transaction and the issuance of
rights by SPARC:
- their pro-rata share of UMG Ordinary Shares, which at cost,
including transaction expenses, represents approximately $14.75 per PSTH share, before
accounting for any dilution from PSTH Distributable Redeemable
Warrants (the “Redeemable
Warrants”);
- their pro-rata share of PSTH after the distribution of the
acquired UMG shares (“PSTH Remainco”),
which will have approximately $5.25 in cash
per share, before accounting for any dilution from PSTH
Distributable Redeemable Warrants; and
- one transferable five-year right per share (a “SPAR”) of Pershing Square SPARC Holdings, Ltd.
(“SPARC”), which is expected to trade
on the New York Stock Exchange.
We describe these three securities in greater detail below:
1. Acquisition and Distribution of 10%
of UMG to PSTH Shareholders
PSTH is in discussions to acquire approximately 10% of the
outstanding Ordinary Shares of UMG (the “UMG
Shares”). Unlike most SPAC business combinations, PSTH and
UMG will not combine into one company following the
Transaction.
Following PSTH’s acquisition of the UMG Shares, UMG will
complete its previously announced listing on Euronext Amsterdam
(the “Listing”) in the third quarter
of 2021. Once the Listing is complete, PSTH will distribute the UMG
Shares directly to PSTH’s shareholders in a transaction registered
with the Securities and Exchange Commission (the “Distribution”).
As the Transaction is structured as a stock purchase and not as
a merger, the Redeemable Warrants and the Director and Sponsor
Warrants (collectively, the “PSTH
Warrants”) will not become exercisable for shares of UMG. As
a result, UMG will not issue warrants in respect of any of the PSTH
Warrants, and will not have any warrants outstanding.
Warrant Exchange Offer
PSTH intends to provide the holders of the currently outstanding
Redeemable Warrants the option to exchange their Redeemable
Warrants for shares of PSTH Class A common stock in an exchange
offer that would be launched after the execution of definitive
documents (the “Warrant Exchange
Offer”).
The exchange ratio for the Warrant Exchange Offer will be
determined based on the cashless exercise redemption table for the
Redeemable Warrants that appears on page 166 of the IPO prospectus
for PSTH. The fair market value of PSTH for the purposes of the
cashless exercise redemption table will be determined by using the
volume-weighted average price of PSTH Class A common stock during
the ten trading days prior to the launch of the offer.
The Warrant Exchange Offer would close prior to the record date
for PSTH’s distribution of UMG shares such that warrantholders who
participate in the exchange offer and continue to hold their PSTH
shares will receive UMG Shares in the Distribution. Warrants not
exchanged in the Warrant Exchange Offer will remain outstanding
with a strike price adjustment according to the Warrant Agreement’s
contractual terms.
Sponsor and Director Warrants
PSTH has not yet finalized the treatment of the Sponsor and
Director Warrants. Vivendi and PSTH are concurrently discussing
additional transactions in which the Sponsor and its affiliates may
acquire additional economic exposure to UMG by acquiring Vivendi
securities and/or UMG securities following the distribution of UMG
Shares by Vivendi. Alternatively, some or all of the Sponsor
Warrants may remain outstanding at PSTH after the distribution of
the UMG Shares.
Sources and Uses
PSTH expects to fund the Transaction with cash held in its trust
account from its IPO ($4 billion plus interest), and approximately
$1.6 billion in additional funds from the exercise of its Forward
Purchase Agreements with the Pershing Square Funds and affiliates.
Approximately $4.1 billion of these proceeds will be used to
acquire the UMG Shares and pay transaction costs, with the $1.5
billion balance to be retained by PSTH Remainco.
PSTH Redemption Tender Offer
The Transaction will not require a
vote of PSTH’s shareholders. PSTH will satisfy its
shareholders’ redemption rights by tendering for its shares at a
price equal to PSTH’s cash-in-trust per share, or approximately $20
per share (the “Redemption Tender
Offer”). The Redemption Tender Offer is expected to be
launched shortly following the execution of the definitive
transaction documentation.
Distribution of Distributable Tontine Redeemable
Warrants
PSTH will distribute Distributable Tontine Redeemable Warrants
to remaining shareholders after completion of the Redemption Tender
Offer and Warrant Exchange Offer. PSTH will make that distribution
to shareholders of record after completion of the Redemption Tender
Offer, but before completion of the Warrant Exchange Offer. This
means that shares that are redeemed in the Redemption Tender Offer
or that are issued in the Warrant Exchange Offer will not receive
the Distributable Tontine Redeemable Warrants.
PSTH to Indemnify Vivendi
PSTH will enter into an indemnification agreement to indemnify
Vivendi and certain of its related parties in connection with the
Distribution and the related registration statement as part of the
Transaction.
2. PSTH Remainco to Pursue Another
Business Combination Following the Proposed
Transaction
After funding the UMG purchase and related transaction expenses,
PSTH Remainco will have $1.5 billion in cash and marketable
securities. In addition, the Forward Purchase Agreements will be
amended to provide that the Pershing Square Funds will continue to
have the right, but not the obligation, to buy approximately $1.4
billion of PSTH’s Class A common stock to fund PSTH’s future
business combination transaction. The Pershing Square Funds will
own approximately 29% of PSTH Remainco before the exercise of any
Additional Forward Purchase Agreements.
PSTH Remainco intends to remain listed on the NYSE. Because the
transaction will satisfy the requirements of an initial business
combination, PSTH Remainco will no longer be treated as a SPAC
under NYSE listing rules.
3. SPARC to Issue Rights to PSTH
Shareholders
An affiliate of our Sponsor has formed an entity that will be
known as Pershing Square SPARC Holdings, Ltd. (“SPARC”), which is a Cayman Islands
Corporation.
SPARC is not a SPAC. It is a
Special Purpose Acquisition Rights Company. Unlike a traditional SPAC, SPARC does
not intend to raise capital through an underwritten offering in
which investors commit capital without knowing the company with
which SPARC will combine.
Instead, SPARC intends to issue rights to acquire common stock
in SPARC for $20.00 per share to PSTH shareholders (“SPARs”) which can only be exercised after SPARC
enters into a definitive agreement for its initial business
combination. The SPARs are expected to trade on the NYSE and have a
term of five years, subject to extension.
SPARs
One SPAR will be distributed for each share of PSTH Class A
common stock outstanding on the record date shortly following the
completion of the Redemption Tender Offer and Warrant Exchange
Offer. Assuming all SPARs are exercised, SPARC will raise $5.6
billion of cash from SPAR holders. SPARC is expected to enter into
forward purchase agreements with affiliates of the Pershing Square
Funds, SPARC’s sponsor, for a minimum investment of $1 billion, and
up to $5 billion, subject to increase with SPARC’s board
consent.
Holders who elect to exercise their SPARs will also receive the
right to exercise a proportionally greater amount of SPARs to the
extent that other holders of SPARs do not exercise their SPARs.
SPARC Will Have Up to $10.6 Billion for its Business
Combination
Assuming all of the SPARs are exercised after an initial
business combination is announced, SPARC will have a minimum of
$6.6 billion of cash and up to approximately $10.6 billion to
consummate a transaction.
SPARC Sponsor Convertible Preferred Shares
The SPARC Sponsor is expected to purchase preferred shares
convertible for up to ten years at $24.00 per share into 4.95% of
the outstanding shares of the post-combination entity on a fully
diluted basis, either by (i) paying $24.00 per share or (ii) by
converting on a “cashless” basis and receiving an amount of
outstanding shares with a value equal to the market value of such
4.95% of shares in excess of $24.00 per share.
SPARC’s Structural Advantages
SPARC’s structure has been designed to allow SPAR holders to
avoid incurring the opportunity cost of capital of a typical SPAC,
as the SPARs will not be exercisable, and holders will not be able
to acquire shares in SPARC, until a definitive agreement has been
signed. The SPARC Sponsor will also benefit by not having any time
pressure associated with the typical two-year SPAC commitment
period.
SPARC will not have any shareholder warrants outstanding, nor is
it expected to incur any underwriting costs.
SPARC common shares will initially be owned 100% by affiliates
of Pershing Square so no vote will be required from other
shareholders to consummate a transaction. SPARC common stock will
become publicly traded only after a business combination partner
has been identified, a definitive agreement has been fully
executed, and the SPAR offering has been completed.
SPARC to File a Registration Statement with the SEC
Shortly
SPARC has not yet filed a registration statement with the SEC,
but will do so on a confidential basis shortly. An affiliate of the
SPARC Sponsor expects to commence the distribution of SPARs to PSTH
shareholders following the SEC review process and the completion of
PSTH’s Warrant Exchange Offer and Redemption Tender Offer.
The SPAR distribution is subject to NYSE review, and will take
place only pursuant to an effective registration statement under
the Securities Act of 1933. No assurance can be given that SPARC
will be ultimately effectuated on the above outlined terms or at
all.
Conditions to the Transaction
The parties have yet to enter into definitive agreements in
respect of the Transaction. It is possible that the final
transaction will be different from the Transaction outlined above
or may not occur at all. The Transaction is expected to be subject
to customary closing conditions including the authorization to be
given by Vivendi shareholders at the June 22, 2021 Shareholders’
Meeting.
About Pershing Square Tontine Holdings, Ltd.
Pershing Square Tontine Holdings, Ltd., a Delaware corporation,
is a blank check company formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with a private
company. PSTH is sponsored by Pershing Square TH Sponsor, LLC (the
“Sponsor”), an affiliate of Pershing
Square Capital Management, L.P., a registered investment advisor
with approximately $14 billion of assets under management.
www.PSTontine.com
About Universal Music Group
Universal Music Group (“UMG”) is
the world leader in music-based entertainment, with a broad array
of businesses engaged in recorded music, music publishing,
merchandising and audiovisual content in more than 60 countries.
Featuring the most comprehensive catalog of recordings and songs
across every musical genre, UMG identifies and develops artists and
produces and distributes the most critically acclaimed and
commercially successful music in the world. Committed to artistry,
innovation and entrepreneurship, UMG fosters the development of
services, platforms and business models in order to broaden
artistic and commercial opportunities for our artists and create
new experiences for fans. Universal Music Group is a Vivendi
company. www.universalmusic.com
About Vivendi S.E.
Since 2014, Vivendi has built a world-class media, content and
communications group. The Group owns leading, strongly
complementary assets in music (Universal Music Group), television
and movies (Canal+ Group), communications (Havas Group), publishing
(Editis), magazines (Prisma Media), video games (Gameloft), live
entertainment and ticketing (Vivendi Village). It also owns a
global digital content distribution platform (Dailymotion).
Vivendi’s various businesses cohesively work together as an
integrated industrial group to create greater value. Vivendi is
committed to the environment and aims at being carbon neutral by
2025. In addition, the Group helps building more open, inclusive
and responsible societies by supporting diverse and inventive
creative works, promoting broader access to culture, education and
to its businesses, and by increasing awareness of 21st-century
challenges and opportunities. www.vivendi.com
Important Additional Information and Where to Find It
This press release does not constitute an offer to sell or buy
or the solicitation of an offer to buy or sell any securities.
The proposed transactions described in this press release have
not yet commenced, may proceed on materially different terms and
may not occur at all. This communication is for informational
purposes only. This communication is not a recommendation to buy,
sell or exchange any securities, and it is neither an offer to
purchase nor a solicitation of an offer to sell securities. The
Redemption Tender Offer and the Warrant Exchange Offer (together,
the “Offers”) will only be made
pursuant to offers to purchase or exchange, letters of transmittal
and related materials that will be filed with the applicable
Schedule TO on the commencement date of each Offer. PSTH
shareholders and warrantholders should read those materials
carefully because they will contain important information,
including the various terms of, and conditions to, the Offers. PSTH
shareholders and warrantholders will be able to obtain free copies
of those materials as well as the other documents that PSTH and
SPARC will be filing with the SEC, which will contain important
information about PSTH, SPARC, the Offers and the proposed
transactions, at the SEC’s website at www.sec.gov.
Forward-Looking Statements
This press release contains certain forward-looking statements
within the meaning of the federal securities laws with respect to
the proposed transaction between PSTH and Vivendi, including
statements regarding the benefits of the transaction, the
anticipated timing of the proposed transaction, the services
offered by UMG and the markets in which it operates. These
forward-looking statements generally are identified by the words
"believe," "project," "expect," "anticipate," "estimate," "intend,"
"strategy," "future," "opportunity," "plan," "may," "should,"
"will," "would," "will be," "will continue," "will likely result,"
and similar expressions. Forward-looking statements are
predictions, projections and other statements about future events
that are based on current expectations and assumptions and, as a
result, are subject to risks and uncertainties. Many factors could
cause actual future events to differ materially from the
forward-looking statements in this release, including but not
limited to: (i) the risk that the proposed transactions may not be
completed in a timely manner or at all, or may be completed on
terms materially different from those described herein, which may
adversely affect the price of PSTH’s securities, (ii) the risk that
the proposed transactions may not be completed by PSTH’s business
combination deadline and the potential failure to obtain an
extension of the business combination deadline if sought by PSTH,
(iii) the failure to satisfy the conditions to the consummation of
any aspect of the proposed transactions, (iv) the lack of a third
party valuation in determining whether or not to pursue the
proposed transactions, (v) the occurrence of any event, change or
other circumstance that could give rise to the proposed
transactions not occurring, (vi) the effect of the announcement of
the negotiations of the proposed transactions on UMG’s business
relationships, performance, and business generally, (vii) the
outcome of any legal proceedings that may be instituted against
PSTH, SPARC, Vivendi, UMG or their respective directors or officers
related announcement of the proposed transactions, (viii) the
amount of the costs, fees, expenses and other charges related to
the proposed transactions, (ix) the ability to maintain the listing
of PSTH’s securities on NYSE, (x) the price of PSTH’s securities
may be volatile due to a variety of factors which may also include
changes in UMG’s business and operations and in performance across
its competitors, changes in laws and regulations affecting UMG’s
business and changes in its capital structure as a result of the
proposed transactions and its contemplated public listing, (xi) the
ability to implement business plans, forecasts, and other
expectations after the completion of the proposed transaction, and
identify and realize additional opportunities, (xii) the amount of
common stock redeemed by PSTH’s public shareholders, (xiii)
possible variances between the historical financial information UMG
presents and its future financial statements, when they become
available, (xiv) potential material differences between the terms
of SPARC described herein and those ultimately offered to investors
or the SEC failing to declare the registration statement in respect
of SPARC’s securities effective or imposing burdensome conditions
that would prevent SPARC from operating in the manner intended and
(xi) the impact of the global COVID-19 pandemic on any of the
foregoing.
The foregoing list of factors is not exhaustive. You should
carefully consider the foregoing factors and the other risks and
uncertainties described in the “Risk Factors” section of the
registration statements for the Distribution and the SPARC rights
offering that will be filed with the SEC in respect of the proposed
transactions. Those filings identify and address other important
risks and uncertainties that could cause actual events and results
to differ materially from those contained in the forward-looking
statements. Forward-looking statements speak only as of the date
they are made. Readers are cautioned not to put undue reliance on
forward-looking statements, and PSTH assumes no obligation and does
not intend to update or revise these forward-looking statements,
whether as a result of new information, future events, or
otherwise. PSTH does not give any assurance that PSTH will achieve
its expectations or that the proposed transactions will occur at
all. The inclusion of any statement in this press release does not
constitute an admission by PSTH or any other person that the events
or circumstances described in such statement are material.
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version on businesswire.com: https://www.businesswire.com/news/home/20210603006166/en/
Francis Mcgill mcgill@persq.com
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