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Pershing Square rejigs Universal Music deal

Pershing Square rejigs Universal Music deal – On Sunday, the board of Pershing Square Tontine Holdings  – the special purchase acquisition company (SPAC) that Pershing Square listed on the New York Stock Exchange (NYSE) last year – decided not to proceed with its planned acquisition of a stake in Universal Music Group. That deal will instead be made by the London-listed Pershing Square Holdings. Pershing Square has also assumed the liabilities that the SPAC had under an indemnity agreement with Vivendi and the transaction costs that the SPAC has accrued to date in connection with the deal.

Pershing Square Tontine Holdings is also withdrawing its redemption tender offer and related warrant exchange offer.

The US Securities Exchange Commission (SEC) had been questioning several elements of the proposed transaction – in particular, whether the structure of the SPAC’s initial business combination qualified under the NYSE rules.

Pershing Square Tontine Holdings’ management and board believe that greater shareholder value can be created by working to identify a new merger partner. It now has 18 months to close a new transaction, unless its shareholders vote to extend this. Whatever deal they come up with, it will be structured as a conventional SPAC merger.

The announcement noted the 18% fall in Pershing Square Tontine Holding’s share price since the transaction was announced on June 4th. The board felt that it had underestimated the reaction that some shareholders would have to the transaction’s complexity and structure, the transaction’s potential impact on investors who are unable to hold foreign securities, those who margin their shares, or those who own call options on Pershing Square Tontine Holding’s stock.

Pershing Square Holdings intends to be a long-term shareholder in Universal Music, and says that it will try to work with Universal Music management to help create value for all stakeholders.

[This news makes little initial difference to Universal Music Group and Vivendi still gets its cash. It is hard to guess the impact of this on Pershing Square but reputationally this is not great. That could quickly be rectified if Tontine Holdings identifies a merger candidate that investors can get more excited about. If not, the idea that Pershing Square could launch a string of these transactions might be dead in the water.]

PSH : Pershing Square rejigs Universal Music deal

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