Bill Ackman’s Pershing Square has confirmed it is in talks to buy a 10% stake in Universal Music Group. Yahoo Finance’s Adam Shapiro and Julia La Roche discuss.

Video Transcript

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ADAM SHAPIRO: So the world is talking about the latest deal that Bill Ackman has struck. Pershing Square Tontine Holdings is going to purchase, what is it? 10% of Universal Music Group. It's a $4 billion purchase. It values Universal Music at $42 billion. Julia La Roche, when I think Universal Music, I don't think about them, I think about Lady Gaga, Taylor Swift. I mean, they have huge musicians, as well as Queen and the Beatles, right?

JULIA LA ROCHE: Well, look, this is a fascinating deal, and probably not the one that a lot of folks were expecting from Bill Ackman's Pershing Square Tontine Holdings, because it's not your traditional SPAC deal here. Rather than an actual traditional merger, the shareholders of Pershing Square Tontine Holdings will receive shares in Universal Music Group. But it's interesting, because I followed Bill Ackman for a long time, and to be clear, we haven't heard from him beyond the press release here.

But he is kind of known for his investment framework of how he likes to look for these cash flow generative companies with outstanding managements, with high barriers to entry, those sorts of things. But he did tout the irreplaceable intellectual property owned by this company, also its must-have content, and what he sees as many years of growth globally as more consumers adopt streaming. So we could talk about that part of the deal. But also, there's some more complex things we could dig into here as well, Adam.

ADAM SHAPIRO: Well, forget complexity, right, because this company, I think Vivendi is the majority owner. But it's going to list publicly still in Amsterdam. So I mean, look, Bill Ackman is certainly an accomplished investor. There's a play here. It doesn't sound like he's going to be short term on it, or what do you think?

JULIA LA ROCHE: No. And actually, if you read the, so if you read the document that came out overnight from Bill, the reason I say it's complex is, OK, this isn't the traditional one we were thinking of. It's not a traditional merger. They'll be part of that listing. They'll have 10% of those shares that Pershing Square Tontine Holdings will have acquired for its shareholders. Now, Pershing Square Tontine Holdings will continue to trade. It will be listed under the kind of SPAC rules, so you won't think of it as a traditional SPAC, but it'll have $1.5 billion or so in cash. And it will still look for another deal. It'll be a smaller deal, but that is another thing to look for.