Bill Ackman's Pershing Square Capital has made a takeover offer for Universal Music Group, the world's largest record company, offering approximately 55 billion euros (over 63 billion US dollars) and planning to move its stock listing from Amsterdam to the New York Stock Exchange.

According to The Wall Street Journal on Tuesday, the transaction is expected to be completed by the end of this year, with the specific structure involving Universal Music merging with Pershing Square's SEC-registered acquisition vehicle, Pershing Square Sparc Holdings. The merged entity will be registered in Nevada.

Ackman stated in a release, "Universal Music's stock has been undervalued for a long time due to a series of issues unrelated to its music business performance, all of which can be resolved through this transaction."

Universal Music's stock has fallen by more than 20% in the past six months, with market concerns about artificial intelligence potentially compressing profit margins in the music industry being a major drag. If the takeover offer materializes, it would be one of the largest M&A deals in the entertainment industry in recent years, directly altering the capital structure and listing landscape of the music giant that boasts top artists like Taylor Swift and Kendrick Lamar.

Deal Structure: Cash and Stock, Valued at 30.40 Euros Per Share

According to Pershing Square's statement, Universal Music shareholders will receive 5.05 euros in cash and 0.77 shares of the new company for each Universal Music share they hold, with the total cash consideration amounting to approximately 9.4 billion euros. This implies a price of about 30.40 euros (approximately 35.09 US dollars) per share, valuing Universal Music's equity at approximately 55 billion euros.

Pershing Square has held shares in Universal Music since 2021. Ackman previously served as a board member of Universal Music until he resigned in May last year. According to The Wall Street Journal, Ackman had been consistently advocating for the company to list in the US during his tenure.

Depressed Stock Price and Valuation Discount: Ackman Lists Three Key Issues

Pershing Square's statement specifically identified three factors dragging down Universal Music's valuation.

First, the company lacks a publicly disclosed capital allocation plan; second, the market has not fully reflected the value of Universal Music's stake in the music streaming platform Spotify; and third, the uncertain future of the 18% stake held by the Bolloré Group, controlled by French billionaire Vincent Bolloré's family, has created doubts in the market regarding the company's controlling structure.

The Bolloré Group spun off Universal Music from its French media conglomerate Vivendi in 2021. Currently, China's Tencent is the second-largest shareholder in Universal Music, with an 11.4% stake.

As of press time, spokespersons for Universal Music and the Bolloré family had not responded to the aforementioned takeover offer.

Relocation to New York: A Key Step to Unlocking Higher Valuation

One of the core rationales behind this transaction is the relocation of Universal Music's listing from Europe to the US capital markets. Universal Music listed on the Euronext Amsterdam exchange in September 2021, with its operational headquarters in Santa Monica, California, and its registered office in Hilversum, Netherlands.

Ackman believes that the European market's liquidity and valuation framework have not fully captured Universal Music's intrinsic value, and moving to the New York Stock Exchange would help attract a broader range of US institutional investors and drive a revaluation.

Last year, Universal Music had announced plans to issue some of Pershing Square's shares in the US, but the scale and ambition of this comprehensive merger proposal are clearly a step further.