Pershing Square Tontine Holdings (PSTH), a special purpose acquisition company (SPAC), said on Monday morning it is set to take a 10% stake in Universal Music Group (UMG), a share worth approximately $4bn (£2.9bn).
The agreement is with UMG's majority owner, French media conglomerate Vivendi, which is set to complete a listing of UMG on the Euronext Amsterdam. Shares representing 10% of the music heavyweight will be distributed to Pershing shareholders.
Tontine became the biggest ever SPAC when it raised $4bn in an initial public offering (IPO) last summer, with Ackman's hedge fund Pershing Square committing a minimum of an additional $1bn.
It did so to take a company public. Yet Universal is already in the process of being listed in Amsterdam by its French parent Vivendi, and it will not rely on Tontine to go public, as most companies do in their SPAC deals.
Vivendi's listing on the Euronext will see 60% of the company floated on the exchange, and will complete by 27 September at the latest.
The distribution of the company will be 10% owned by Vivendi, 10% by PSTH, 60% on the stock exchange and 20% by a consortium led by Tencent.
In a filing to its investors, PSTH said UMG, which represents artists such as Taylor Swift and Lady Gaga, presents a number of competitive advantages and strategic attributes. These include an iconic world-class management team, global consumer adoption of streaming and the growth associated with that market, and a significant fixed‐cost expense base allowing for long‐term margin expansion, it said.
The filing also stated: "During the course of our negotiations with Vivendi, it became clear that various tax, legal and other strategic considerations precluded Vivendi from entering into a 'traditional' de-SPAC merger transaction, and from selling more than 10% of UMG.
"Even with the additional complexity, time, legal, and other costs that these constraints created, we were convinced that the opportunity to acquire such an extraordinary business was the best option for our shareholders."
The unusual deal puts a lid on a worldwide hunt for a suitable target by Pershing CEO Bill Ackman, who previously flirted with holiday rentals company Airbnb and Southeast Asian ride-hailing and food delivery firm Grab Holdings as targets.
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