Photo Credit: Bill Ackman by Adam Jeffery for CNBC
Universal Music Group (UMG) “has to do something” and “really needs a reset” amid rumored investor concerns as well as a sagging share price – at least according to Pershing Square’s Bill Ackman, who’s weighing in after unveiling a $64 billion offer for the major label conglomerate.
Ackman made these and other comments during a recent Bloomberg interview, about one month after Pershing Square revealed an aggressive UMG takeover proposal. We broke down said proposal in detail.
But the short version is that Pershing would shift Universal Music’s main stock listing to the States, offload its (UMG’s) entire Spotify stock position, establish a new board, and cancel out approximately 17% of the music giant’s shares.
Fast forward to the present, with just seven days remaining until Universal Music’s annual shareholder meeting, and the board still hasn’t formally responded to (save in an initial notice of acknowledgement) Pershing’s bid.
As described by Ackman, the time is right for UMG to embrace an operational overhaul under the plan, which, he acknowledged once again, will require the support of leading shareholder Bolloré Group.
“The gameplan there is – absolutely, we need the support of Bolloré Group,” Ackman said. “But what we’re proposing I think is very much aligned with what they’re interested in. … [UMG has] not graduated from operating like a private company into being a public company. And they’ve lost, I would say, the confidence of the shareholders and the analyst community.”
The alleged confidence contraction, Ackman continued, is why UMG is trading beneath its 2021 IPO valuation and “really needs a reset.”
What about the steps Universal Music brass have taken since receiving Pershing’s offer?
Addressing UMG’s decision to cash in on half its Spotify stock, Ackman said the major should “sell the balance.” Meanwhile, when it comes to a supersized share-buyback program, “there’s an opportunity to do more,” per the Pershing Square head.
“I mean, the company has to do something. This is a very good solution to the various issues that confront the company,” Ackman concluded.
Is the current “something” – improved earnings-report transparency, the partial Spotify stock divestment, and the enhanced buyback program – sufficient for investors? That remains to be seen, but UMG is now in the habit of putting out weekly press releases concerning its share buybacks. As of April 30th, the company had deployed €38.5 million ($45.2 million) in this department.
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