Universal Music Group Isn’t Feeling the Pershing Square Remix

Photo Credit: Universal Music Group

Universal Music Group issues a statement on Pershing Square’s unsolicited offer ahead of the Board of Directors completing its review of the proposal.

Pershing Square’s proposed $64 billion takeover scheme for Universal Music Group (UMG) has the industry buzzing and stocks soaring. But the company’s Board of Directors doesn’t seem too keen on the offer, especially given Pershing’s less-than-complimentary remarks about Lucian Grainge and the label giant’s broader strategy.

In a statement to Digital Music News, UMG confirmed that its Board of Directors received the unsolicited proposal from Pershing Square, and that “together with its advisors, [it] will review the proposal in accordance with its fiduciary duties and analyze its implications for shareholders, employees, artists, songwriters, and other stakeholders.”

“The Board of Directors has complete confidence in UMG’s strategy and the leadership of Sir Lucian Grainge and the Company’s management team,” the statement continues. “UMG will have no further comment on the proposal until the Board of Directors completes its review.”

Notably, two-thirds of UMG investors must approve the proposal for it to move forward. Existing investors would have the option of trading each of their shares in the current UMG for the “new” UMG, which would see Pershing up its stake to 11.7%.

“This is a company with a concentrated shareholder base,” said Pershing Square CEO Bill Ackman during a 75-minute conference call this morning. “Bolloré Group controls 28% of the business. The transaction here requires [a] two-thirds vote of shareholders. […] Without Bolloré, we don’t have a transaction.”

He added that his “first phone call” yesterday was to Bolloré Group, which was apparently pleased with the proposal. As a result, Pershing “decided to go forward and launch this presentation.”

It remains to be seen if other shareholders will be as gung-ho about the possibility of UMG’s reincorporation. But given that Ackman also mentioned restructuring Grainge’s “much too complicated” contract, it seems the company might have an uphill battle ahead of it.