Pershing Square Tontine, the SPAC formed last summer by Bill Ackman, confirmed that it's in talks to buy a 10% stake in Universal Music Group from Vivendi at a $40 billion enterprise value.
The big picture: At first glance, this isn't what Tontine was formed to do. Or what any SPAC is formed to do, since they're expected to buy/merge private companies. It also had expected to sign a deal in 2020, per this Axios Re:Cap interview with Ackman last July.
- Tontine raised more money than any SPAC in history and its prospectus repeatedly mentioned an interest in "mature unicorns." This led to lots of speculation that it would try to buy a company like Airbnb or Stripe, and word is that it did at least try to kick those sorts of tires.
- The prospectus also mentioned private equity-owned and family-owned businesses (e.g., Bloomberg), although I can't find anything in there about corporate carveouts.
The twist: Tontine plans to also form what it's calling a SPARC, or special purpose acquisition rights company, seeded with cash that's not going to Universal.
- This is different from the recent "Spinning Eagle" effort, which wanted to use stub cash to form a new SPAC (until the SEC suggested it not).
- Instead, the SPARC will only collect cash from investors once it's identified a target and published a prospectus. At that point investors can either buy in, or trade their "rights" to the SPAC, which one source says is expected to trade pre-announcement in the $5 to $8 range.
- The SPARC is expected to have the same official investment strategy as the original Tontine SPAC, and at least $6.5 billion at its disposal. Airbnb might be off the table, but Stripe and Bloomberg are still kicking around.
Investor reax: Tontine shares tanked on the news, which means Ackman has an uphill battle to convince "Tontards" that he got them a much better price than what they could get buying Universal on the open market (since Vivendi already had signaled plans to list it).
- Investors might also be unhappy that they won't get a vote on the Universal deal. Pershing Square instead plans to satisfy redemption rights via a tender offer, which is certainly something that the SEC will review.
The bottom line: Bill Ackman is many things. Boring isn't one of them.