The SEC Unravels One of the Biggest SPAC Deals Ever as Pershing Square Tontine Holdings (PSTH) Has Now Abandoned Its Plans To Acquire a 10 Percent Stake in Universal Music Group (UMG)
Pershing Square Tontine Holdings (NYSE:PSTH), one of the highest-ranked Special Purpose Acquisition Companies (SPACs) currently in the market, had acquired quite a stir earlier in June when it unveiled a i-of-a-kind deal to acquire a 10 percent stake in Universal Music Group (UMG), a global music company that has Vivendi as its major shareholder. Interestingly, unlike the majority of other SPACs on the market, this deal did non plant a merger, thereby allowing PSTH to retain its SPAC structure for a future merger.
At present, however, information technology appears that Nib Ackman'due south Pershing Square Tontine Holdings has abased its plans vis-à-vis the Universal Music Grouping following sure objections from the SEC. As per a letter of the alphabet to its shareholders released moments ago, PSTH's board has unanimously decided to abandon the UMG deal:
"Yesterday, our board of directors unanimously determined not to proceed with the Universal Music Group transaction, and to assign our share buy agreement to Pershing Square Holdings, Ltd. (LN:PSH) (LN:PSHD) (NA:PSH) and affiliates ("PSH and affiliates" or "Pershing Foursquare"). Pershing Square has likewise agreed to assume the Vivendi indemnity understanding and our UMG transaction costs."
The letter goes on to state:
"In low-cal of these developments, PSTH is withdrawing its Redemption Tender Offer and related Warrant Commutation Offer."
While explaining the rationale behind this move, Pershing Square Tontine Holdings has revealed that the SEC raised several objections to the construction of the deal, including a potential conflict with NYSE listing rules, which led the SPAC to conclude that it may not be able to consummate the acquisition of a stake in UMG.
As a refresher, nether the terms of the original bargain, Pershing Foursquare Tontine Holdings would accept used only $2.5 billion from its IPO proceeds to learn a $four.1 billion pale in UMG, with the residual $ane.6 billion coming from the exercise of PSTH's forward purchase agreements with Pershing Square Funds and affiliates. Consequently, PSTH would have still retained $1.5 billion in its trust account to pursue a merger with another entity. Moreover, PSTH shareholders would have received the following three securities under the original bargain:
- UMG ordinary shares at an gauge price of $14.75 per PSTH share once UMG undergoes an IPO later on in 2021
- Residual PSTH shares to account for the remaining $5.25 per share in cash held in trust
- Transferable five-year rights to acquire a stake in Pershing Square SPARC Holdings, a SPARC or Special Purpose Acquisition Rights Visitor, at $twenty per share. Carry in mind that a SPARC essentially flips the concept of a SPAC on its head. Instead of raising cash in an IPO and then merging with a target, a SPARC only issues rights (chosen SPARs) to acquire shares in the merged visitor without raising any cash. Once the transaction is finalized, the cash is raised as investors do their SPARs
While Pershing Square Tontine Holdings shares had declined when this complex deal was announced, we had taken a positive view of the system in light of the significant upside potential for investors. Every bit an analogy, the deal would have valued UMG at around $forty billion, a substantial discount to the visitor's recent valuation of $53 billion and corresponding to just 3.14x UMG'south expected FY 2021 revenue of $12.7 billion.
On the bright side, the unraveling of the UMG deal might now allow Pershing Square Tontine Holdings to deploy the entirety of its considerable resources in order to effect a merger with a viable candidates such as Plaid, Stripe, Porsche, or even Starlink!
Source: https://wccftech.com/the-sec-unravels-one-of-the-biggest-spac-deals-ever-as-pershing-square-tontine-holdings-psth-has-now-abandoned-its-plans-to-acquire-a-10-percent-stake-in-universal-music-group-umg/
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