Pershing Square Tontine Holdings Ltd
Pershing Square Tontine — SPAC Merger (June 2021)
130 slides from Pershing Square Tontine's SPAC merger presentation, Jun 28, 2021
Slide 1: Music is Universal
Music is Universal June 23, 2021 Exhibit 99.3
Slide 2: Agenda
Agenda Transaction Summary Universal Music Group Overview Music Industry Overview A Shareholder’s Perspective on Future Growth Universal Music Group Valuation Q&A Detailed Transaction Overview
Slide 3: What Will PSTH Shareholders Receive?
What Will PSTH Shareholders Receive? SPARC Warrants to purchase SPARC shares at $20 per share Exercisable only after business combination announced $1bn – $5bn FPA Sponsor to purchase 10-year convertible preferred stock covering 4.95% of the fully diluted shares of the post-business-combination comp
Slide 4: Universal Music Group ("UMG")
Universal Music Group (“UMG”)
Slide 5: PSTH's Investment Criteria from IPO Roadshow
Simple, predictable, free-cash-flow-generative business Formidable barriers to entry Exceptional Management & Governance Limited exposure to extrinsic factors that we cannot control Strong balance sheet Minimal capital markets dependency Large market capitalization Attractive Valuation PSTH’s Invest
Slide 6: UMG Meets All of PSTH's Investment Criteria
UMG Meets All of PSTH’s Investment Criteria Simple, predictable, free-cash-flow-generative business Formidable barriers to entry Limited exposure to extrinsic factors that we cannot control Strong balance sheet Minimal capital markets dependency Large market capitalization Attractive valuation Excep
Slide 7: Universal Music Group
World’s leading music company #1 global market share (32%) in recorded music, > 3mm song portfolio #2 global market share (23%) in music publishing, 180k songwriter portfolio Represents 10 out of the top 10 global musical superstars World-class management team with deep industry experience Accelerat
Slide 8: World-Class Management Team Led by CEO Sir Lucian Grainge
CEO Universal Music Group (UMG) Has spent his entire career in the music industry, signing and working with the largest stars Joined UMG in 1986 and was appointed CEO of UMG in 2010 Widely recognized as the industry’s most important executive No. 1 on Billboard’s “Power 100” – the only person to hol
Slide 9: UMG Has a Deep Bench
UMG Has a Deep Bench Boyd Muir Finance, Operations, IT Michele Anthony US Commercial Jeffrey Harleston Legal Eric Hutcherson People & Inclusion Andrew Kronfeld Marketing Michael Nash Digital Strategy Will Tanous Administration & Communications Jody Gerson Publishing Bruce Resnikoff Global Music Cata
Slide 10: UMG Is a Classic Pershing Square Investment
Massive addressable market, strong customer value proposition, and dominant market position support double-digit revenue growth Irreplaceable intellectual property (IP) and must-have content Predictable, recurring revenue streams require almost no capital to grow at a high rate Industry leading posi
Slide 11: Streaming Has Transformed the Business Model
Streaming Has Transformed the Business Model The quality of the music business has improved dramatically due to consumer adoption of streaming Reduced upfront investment and associated risk Distribution and customer-acquisition costs now funded by major tech companies Predictable recurring revenue s
Slide 12: Consistent Growth in Music Industry Revenues During 1990s
8% CAGR Consistent Growth in Music Industry Revenues During 1990s U.S. Recorded Music Industry Revenue ($bn) The music industry exhibited strong growth during the 1990s while deriving nearly all its sales from one-time purchases of CDs, records, etc. Source: RIAA. Note the US industry revenue trends
Slide 13: Piracy and Downloads Led to a Significant Decline Until 2015
(54%) Decline Piracy and Downloads Led to a Significant Decline Until 2015 U.S. Recorded Music Industry Revenue ($bn) The launch of file sharing services unbundled albums and introduced piracy, causing music industry revenues to decline significantly over the next 15 years. Paid downloads and emergi
Slide 14: Streaming Has Returned the Industry to Rapid Growth
13% CAGR Streaming Has Returned the Industry to Rapid Growth U.S. Recorded Music Industry Revenue ($bn) Since 2015, music industry revenues have grown substantially due to consumer adoption of streaming and launches of additional streaming platforms Source: RIAA. Note the US industry revenue trends
Slide 15: Streaming Has Transformed Industry into Music-as-a-Service
Physical Pre 2000 Download 2000 – 2015 Music-as-a-Service Post 2015 One-time Purchase Unbundled Music Subscription Similar to the software industry, the music industry is emerging from a successful business transformation from one-time, lumpy sales of physical products to a recurring, subscription-b
Slide 16: The Transformation of the Music Industry
The Transformation of the Music Industry Physical Music One-off album sales and tracks Limited access to music Poor user experience Limited functionality Inconvenient Limited addressable market ~10% of the world Large investment in manufacturing and distribution Large customer acquisition costs Limi
Slide 17: Impact of Music Industry Transformation
Impact of Music Industry Transformation Democratization of access to music Access to 60mm songs for free (ad-supported) or by inexpensive subscription with smartphone, computer, connected car or speaker Globalization of the music business Enhanced value of catalog Remonetization Extremely low cost-p
Slide 18: UMG Business Overview
UMG Business Overview Discovers and develops recording artists Markets and promotes artists and their music Distributes artists’ music in digital and physical formats Acquires, licenses and administers rights to musical compositions How does UMG make money? What does UMG do? Earns royalties each tim
Slide 19: A Brief Primer on the Music Business: Recorded Music
A Brief Primer on the Music Business: Recorded Music Record Labels discover artists, fund their development, and work collaboratively with artists to maximize their commercial success “Break” new artists to the world Invest in A&R (Artist & Repertoire – think R&D) and marketing expenses Invest in ar
Slide 20: A Brief Primer on the Music Business: Publishing
A Brief Primer on the Music Business: Publishing Music publishers represent the songwriter Administer, license, promote, and monetize rights to musical compositions and lyrics Music publishers share these royalties with songwriters Royalty rates may be subject to government minimums (i.e., the Copyr
Slide 21: UMG Business Segment Overview
Recorded Music – 80% of Revenue Highly recurring and predictable, growing revenue stream Revenue growth rates driven by attractive end-market growth (a derivative of streaming adoption) and UMPG share gains Double-digit revenue growth driven by global consumer adoption of premium subscription servic
Slide 22: High Rate of Organic Revenue Growth
High Rate of Organic Revenue Growth UMG Organic Revenue Growth (%) and Revenue (€mm) Reported Revenue € 5,108 Source: Company filings 2020 revenue growth negatively impacted by COVID-19 € 5,267 € 5,673 € 6,023 € 7,159 € 7,432 UMG’s organic revenue growth has accelerated to double-digit growth in rec
Slide 23: Streaming Revenues Are Growing Rapidly Within UMG
Streaming Revenues Are Growing Rapidly Within UMG YoY Streaming Organic Growth (%) 43% 58% 35% 37% 22% 16% Source: Company filings The adoption of streaming has accelerated UMG’s overall revenue growth despite streaming’s cannibalization of legacy listening formats UMG Revenue (€mm) and Streaming Or
Slide 24: UMG's Financial Evolution
UMG’s Financial Evolution 2015 – €5.1bn 2020 – €7.4bn UMG Revenue Composition (%) Streaming 52% Streaming 19% Publishing Publishing Recorded Music 80% Recorded Music 81% Source: Company filings The consumer adoption of streaming has transformed UMG’s financial profile – streaming is now >50% of reve
Slide 25: UMG Operating Profit Margins
UMG Operating Profit Margins Robust Margin Expansion Mix-shift from physical to streaming supports gross margin expansion Operating leverage and business optimization initiatives also drive margin Operating profit margins have expanded nearly 600bps since 2015 as streaming has become a larger percen
Slide 26: Impact of COVID-19 on UMG
Impact of COVID-19 on UMG Impact on Revenue Impact on Expense On balance, COVID-19 has been a modest headwind to operating earnings and the recovery will be a tailwind in 2H’2021 and 2022 UMG rationalized marketing, A&R and SG&A expenses Expect some of these cost actions to prove permanent given enh
Slide 27: Music Industry Overview
Music Industry Overview
Slide 28: Streaming Now Represents the Majority of Revenues
Streaming 22% Growth Physical (10%) Decline Downloads (20%) Decline Other 8% Growth % of U.S. Recorded Music Revenue and Growth Rate (3-Year CAGR) In the U.S., which is the world’s largest music market, streaming now represents 70%+ of U.S. revenues, and has recently averaged more than 20% annual gr
Slide 29: Music Remains Under-Monetized Relative to 1999
Despite a resurgent market in recent years, the U.S. music industry’s revenues per capita are significantly below peak levels U.S. Recorded Music Industry Nominal and Inflation-Adjusted Revenue Per Capita 55% Decline Source: RIAA Music Remains Under-Monetized Relative to 1999 Per-capita music spend
Slide 30: Music Streaming Is a Very Low-Cost Form of Entertainment
Source: JP Morgan research Music Streaming Is a Very Low-Cost Form of Entertainment Cost of Entertainment – Per Hour A music streaming subscription is one of the lowest-cost forms of high-value entertainment, with a listening cost per hour of about 10 cents
Slide 31: Streaming Offers an Incredible Customer Value Proposition
Music is universal – everyone listens to music Consumption of music has never been greater People enjoy listening to the same songs many, many times Music is the ideal short-format content Music can be listened to as a primary activity, in the background, or as an enabling tool to enrich a broader e
Slide 32: Technology Leaders are Investing to Drive Streaming Adoption
Estimated Paid Streaming Users (millions, latest available) and Parent Company Market Capitalization ($bn) Well-capitalized technology companies see music as a critical tool to cultivate customers, and are investing heavily in streaming services Source: Company Filings, MIDiA, Bloomberg, Pershing Sq
Slide 33: Streaming Is an Extremely High-Quality Growth Business
Enhanced profitability Subscription revenues are a growing annuity Streaming growth has continued during the COVID crisis Streaming is a higher-margin business because savings on manufacturing and distribution costs more than offset higher royalty rates to artists Higher mix of high-value catalog (s
Slide 34: Streaming Improves Record Labels' Value Proposition
Help artists maximize their commercial success with World-class marketing Global operations Unrivaled distribution Data & analytics Additional monetization opportunities (merchandising, film, etc.) Established artists enjoy higher royalty rates, commensurate with the lower risk profile they represen
Slide 35: Major Music Companies Create High-Demand Content
Others Recorded Music Market Share (2020) Source: Music & Copyright Major Music Companies Create High-Demand Content The top three music companies account for nearly 70% of all streams, and digital service providers (“DSPs”) need all of this content Consumers demand that all music is available from
Slide 36: Music Is a Better Streaming Business than Video
All DSPs need the entire music catalog and genres to be attractive to subscribers Each DSP needs only a critical mass of content to be attractive to subscribers Limited number of key content providers Large number of content providers Distributors have limited exclusive content Distributors have a l
Slide 37: Streaming Substantially Lowers Risk for Record Labels
Lack of physical inventory eliminates inventory risk Utilize platforms to identify trending artists and prospective talent Data and analytics help calibrate marketing and promotional investments No risk of physical inventory obsolescence Shift to recording individual tracks and partial albums lowers
Slide 38: Streaming Benefits the Entire Music Ecosystem
This mutually beneficial ecosystem incentivizes all parties to grow streaming Artists Generates a rapidly growing stream of recurring revenue Enhances profitability Improves monetization of high-value catalog (songs older than 3 years) Higher relative and absolute advances and royalty payments Conve
Slide 39: A Shareholder's Perspective on Future Growth
A Shareholder’s Perspective on Future Growth
Slide 40: Music Streaming Is Growing Rapidly
Global Streaming Trade Revenue 2015 to 2019 ($bn) Paid streaming has grown at a 37% compounded annual rate over the last five years, and is currently growing at more than 20% +37% CAGR Source: IFPI Music Streaming Is Growing Rapidly
Slide 41: Key Drivers of Future Streaming Growth
Key Drivers of Future Streaming Growth Paid Streaming >70% Percentage of subscription revenues Expand subscriber base Ad-Supported Streaming >20% Percentage of advertising revenues Improve monetization Additional High-Growth Opportunities <10% Highly varied Unlock new revenue streams 1 2 3 % of Rev
Slide 42: Paid Streaming (>70% of industry revenue)
Paid Streaming (>70% of industry revenue) 1
Slide 43: Overview of Paid Premium Streaming Ecosystem
Overview of Paid Premium Streaming Ecosystem Digital Service Providers (“DSP”) Record Label Revenues Artists Retail Pricing (“ARPU”) Subscribers Retail Revenue Recorded Music Industry Revenues DSPs set Retail ARPU DSPs incur marketing & customer acquisition costs Pay 52%+ of Revenue to Recorded Musi
Slide 44: Key Drivers of Paid Subscription Streaming Revenue
Potential for DSP pricing increases in each country over time; the fast growth of streaming in developing markets will moderate increases in global ARPU Key Drivers of Paid Subscription Streaming Average Revenue Per User (ARPU) Subscriber Growth Population growth Smartphone penetration Subscriber pe
Slide 45: Smartphone Installed Base Growing Quickly
Smartphone Installed Base Growing Quickly The installed base of smartphones has grown rapidly over the last four years Source: GSMA Smartphone Installed Base 2015 to 2019 (bn) +16% CAGR
Slide 46: Smartphone Penetration Is Increasing Rapidly
Smartphone Penetration Is Increasing Rapidly Since 2015, the global smartphone penetration rate has increased nearly 20 points Smartphone Penetration Rate of Global Population 2015 to 2019 Avg: 5 pt increase per annum Source: Smartphone penetration rate calculated as smartphone installed base per GS
Slide 47: Smartphone Penetration Rate Likely to Grow Meaningfully
Smartphone Penetration Rate Likely to Grow Meaningfully Smartphone Penetration Rate by Geography 2015 to 2030E We estimate that the proportion of the population with a smartphone will increase from 44% to more than 60% by 2030 driven by declining smartphone cost and greater disposable income Source:
Slide 48: Growing Smartphone Streaming Penetration Rate
Growing Smartphone Streaming Penetration Rate Paid streaming subscriber penetration as a percentage of global smartphones has more than doubled since 2015 to 11% Paid Streaming Subscriber Penetration Rate of Smartphone Installed Base Growth 2015 to 2019 Avg: 2 pt increase per annum Source: Paid stre
Slide 49: Low Penetration Rates Beyond Developed Markets
Paid Streaming Penetration Rate of Smartphones by Geography 2019 Subscriber penetration of smartphones is significantly higher in the developed markets compared to China and other emerging markets Low Penetration Rates Beyond Developed Markets Source: MIDiA and GSMA (1) Includes USA, Japan, The Unit
Slide 50: Continued Opportunity for Growth in Developed Markets
Continued Opportunity for Growth in Developed Markets The average subscriber penetration of smartphones in developed markets is below the rate of the most advanced countries, the U.S. and Nordics Paid Streaming Penetration Rate of Smartphones by Geography 2019 Source: MIDiA and GSMA (1) Includes Jap
Slide 51: Increased Paid Streaming Penetration in the U.S.
Increased Paid Streaming Penetration in the U.S. Advanced developed countries, such as the U.S., continue to experience accelerated consumer adoption of paid streaming U.S. Paid Streaming Penetration Rate of Smartphones 2015 to 2019 ~3x adoption over 4 years, and growing Source: MIDiA and GSMA
Slide 52: Streaming Penetration Is Rapidly Increasing in China
Streaming Penetration Is Rapidly Increasing in China Consumer adoption of paid streaming in China is significantly below developed markets, but is rising rapidly China Paid Streaming Penetration Rate of Smartphones 2015 to 2019 ~6x adoption over 4 years, and growing Source: MIDiA and GSMA
Slide 53: Tencent Will Help Drive China Paid Subscriber Growth
Tencent Will Help Drive China Paid Subscriber Growth A Tencent led consortium has formed a strategic partnership with UMG, owns 20% of the company, and has an option to acquire a stake in UMG China Tencent Paying vs. Non-Paying Subscribers 2016 to 2020 (mm) Tencent is the largest player in China and
Slide 54: Paid Streaming Penetration Growth
Paid Streaming Penetration Growth Paid Streaming Penetration Rate by Geography 2015 to 2030E The increasing ability to access and listen to paid streaming across a variety of devices, such as smart speakers and connected cars, will drive the continued increase in paid streaming penetration rates in
Slide 55: We Expect Rapid Subscriber Growth to Continue
We Expect Rapid Subscriber Growth to Continue Paid Streaming Subscribers 2019 to 2030E (mm) 14% CAGR As a result of the continued increase in penetration rates for smartphones and streaming subscribers, we expect that paid streaming subscribers will grow from 365 million in 2019 to 1.6 billion by 20
Slide 56: Streaming ARPU Significantly Greater in Developed Markets
Streaming ARPU Significantly Greater in Developed Markets Paid Streaming ARPU by Geography 2019 Source: Paid streaming ARPU calculated as Paid streaming industry trade revenue per IFPI divided by average paid streaming subscribers per MIDiA (1) Includes USA, Japan, The United Kingdom, Germany, Franc
Slide 57: Streaming ARPU Likely to Grow in Every Geography
Streaming ARPU Likely to Grow in Every Geography Paid Streaming ARPU by Geography 2019 to 2030E While we expect ARPU to increase in each region over time, global ARPU will remain unchanged due to faster growth in emerging markets Source: Paid streaming ARPU for 2019 calculated as paid streaming indu
Slide 58: Ad-Supported Streaming (>20% of industry revenue)
Ad-Supported Streaming (>20% of industry revenue) 2
Slide 59: Ad-Supported Streaming Has a Huge User Base
Ad-Supported Streaming Has a Huge User Base Paid Streaming vs. Ad-Supported Users (1) Source: MIDiA, Public filings (1) YouTube’s monthly active user base is self-reported at ~2 billion, Spotify reports >200m+ ad-supported MAUs, Tencent reports >550mm monthly active users Addressable market includes
Slide 60: Ad-Supported Streaming Is Under-monetized
Ad-Supported Streaming Is Under-monetized Global Paid Streaming vs. Ad-Supported Revenue Per User (1) Paid streaming currently generates more than 22 times the level of revenue per user than ad-supported streaming, creating a massive opportunity to increase ad-supported streaming revenue per user ov
Slide 61: U.S. Radio Is an Enormous Unmonetized Market
U.S. Radio Is an Enormous Unmonetized Market for Recorded Music (1) Nielsen (2) United States Copyright Office Share-shift from radio to streaming drives incremental monetization Terrestrial radio in the US operates under an exemption from performance rights for sound recordings(2); artists (and lab
Slide 62: Additional High-Growth Opportunities
Additional High-Growth Opportunities (Currently <10% of industry revenue) 3
Slide 63: Streaming Unlocks Additional High-Growth Opportunities
Streaming Unlocks Additional High-Growth Opportunities Music is a foundational element of high-growth consumer platforms in social media, digital fitness and gaming Social Media Digital Fitness Gaming Music companies are expanding the addressable market for streaming by monetizing music across new f
Slide 64: Social Media and Music Have a Symbiotic Relationship
Social Media and Music Have a Symbiotic Relationship Music is the foundation of user-generated content. Social media is in the early innings of monetizing music Key UMG Partners Music is foundational to social media 9 out of 10 social media users partake in music-related activities Music is the key
Slide 65: Music Is Enabling the Growth of Digital Fitness
Music Is Enabling the Growth of Digital Fitness Digital fitness platforms utilize music to deliver a high-quality and integrated fitness experience Key UMG Partners Digital fitness companies are innovating their offerings around music Providing personalized and on-demand workout solutions with synch
Slide 66: Gaming Provides an Additional Venue for Music Consumption
While music has always been a component of gaming, next-generation platforms are innovative in their use of music and in enabling additional monetization opportunities Gaming Provides an Additional Venue for Music Consumption Key UMG Partners Music has always been a natural complement to gaming, his
Slide 67: Technological Innovation Is Unlocking Untapped Monetization Opportunities
Technological Innovation Is Unlocking Untapped Monetization Opportunities Technological innovation, including the advent of Non-Fungible Tokens (“NFTs”), is creating new opportunities for monetization NFTs have the potential to transform the music business and create a new incremental monetization v
Slide 68: Projected Streaming Market Growth
Projected Streaming Market Growth If ad-supported streaming and additional high-growth opportunities’ revenues continue to grow at high rates, total streaming revenue can grow at a mid-to-high teens annual rate We believe the paid streaming market is likely to grow at a low-to-mid-teens annual rate
Slide 69: Streaming to Generate Nearly All Recorded Music Revenue by 2030
We estimate that streaming will represent more than 90% of recorded music industry revenue by 2030, excluding any opportunities from NFTs and other new revenue-generating technological developments Streaming will represent an even greater proportion of industry profits due to its higher profit margi
Slide 70: UMG Is the Best Company in a Great Industry
UMG Is the Best Company in a Great Industry Industry leading position (#1 share) with irreplaceable must-have content Leading scale and recent investments position UMG to continue to outperform peers Iconic world-class management team Only uncontrolled pure-play music streaming content company Massi
Slide 71: Valuation
Valuation
Slide 72: UMG Deal Valuation Below Warner Music Group
UMG Deal Valuation Below Warner Music Group PSTH’s purchase price for UMG represents a discount to WMG’s trading multiple even though UMG is a vastly superior company Undisputed market-leader UMG represents significantly more of the top artists (10 out of top 10 global artists) World-class managemen
Slide 73: UMG Has a Significant Scale Advantage vs. WMG
UMG Has a Significant Scale Advantage vs. WMG CY 2020 Revenue (€mm) €7,432 €3,785 2.0x Recorded Music Market Share 32% 16% 2.0x Publishing Market Share 23% 11% 2.1x Geographic Markets Covered 180 71 2.5x Employees 9,183 5,500 1.7x # of Top 10 Artists Represented 10 out of 10 0 out of 10 +10 UMG is t
Slide 74: UMG Has Higher Organic Revenue Growth Than WMG
UMG Has Higher Organic Revenue Growth Than WMG Organic Revenue Growth 10% 7% Since 2016, UMG has grown revenues at 10% annually, which is approximately 300bps per annum faster than WMG. The gap has widened to more than 500bps in the last two years 2020 revenue growth negatively impacted by COVID-19
Slide 75: UMG Has Higher Operating Profit Growth Than WMG
UMG Has Higher Operating Profit Growth Than WMG UMG has consistently grown operating profits in excess of 20% annually, about twice the growth rate of WMG Operating Profit Growth 21% 11% Operating Profit defined as EBIT, excluding one-time restructuring costs and amortization of acquired intangibles
Slide 76: UMG's Operating Margins Are Similar to WMG
Despite Scale, UMG’s Operating Margins Are Similar to WMG Despite a significant scale advantage and consistent margin improvement over time, UMG’s margins are not meaningfully higher than WMG’s margins as UMG has invested in growth and building a global footprint CY 2020 Operating Profit Margin Oper
Slide 77: Business Comparison to Spotify and Netflix
Business Comparison to Spotify and Netflix UMG has many structural advantages relative to Spotify while sharing many of the best attributes of Netflix Most Advantaged Position in Streaming Ecosystem Owns Irreplaceable Content Decade Plus Runway of Robust Subscriber Growth Pricing Power High Incremen
Slide 78: Valuation Comparison to Spotify and Netflix
Valuation Comparison to Spotify and Netflix PSTH’s purchase price multiple for UMG is about half the trading multiple of Netflix, which has lower gross margins and greater capital intensity Source: Wall Street Analyst Consensus; Operating Profit defined as EBIT, excluding one-time restructuring cost
Slide 79: Peer Trading Multiples Have Declined Recently
Peer Trading Multiples Have Declined Recently Source: Bloomberg Trading multiples for WMG, Spotify and Netflix have declined recently as their share prices have declined despite continued robust growth and rising consensus estimates Share Price Performance – Since 12/31/2020
Slide 80: UMG Valuation Framework
UMG Valuation Framework UMG should be valued at a significant premium to WMG’s current trading multiple and closer to Netflix’s valuation We believe WMG’s current trading multiple significantly undervalues the business Streaming growth transforms the record label business into fast-growing, capital-
Slide 81: Illustrative Value of UMG Per PSTH Share
Illustrative Value of UMG Per PSTH Share Source: Wall Street research, company filings Assuming a 20% to 40% premium to WMG’s current trading multiple, PSTH’s UMG distribution would be valued at $17 to $20 A 20% to 40% valuation premium to WMG’s current trading multiple implies a significant discoun
Slide 82: PSTH's Purchase Price Represents a Substantial Discount to Analyst Estimates
Source: Wall Street research; (1) Adjusted for comparability to analyst estimates UMG Total Enterprise Value (€ bn) The average analyst estimate of UMG’s enterprise value is €39bn, which is 13% above PSTH’s adjusted €34bn price. JP Morgan values UMG at €50bn, or 47% above PSTH’s acquisition cost PST
Slide 83: Value of UMG Per PSTH Share Implied by Analyst Estimates
Value of UMG Per PSTH Share Implied by Analyst Valuation Estimates Source: Wall Street research The average analyst valuation estimate implies a UMG value of $15.44 per PSTH share. The highest estimate implies a UMG value of $20.20 per PSTH share
Slide 84: Select Research Analyst Valuation Commentary
Source: JPMorgan. Permission neither sought nor received. “…WMG …itself trades at a 20% discount to JPM’s [price target]. We would argue that UMG should trade on a 20%+ premium to WMG's fair value to reflect that UMG has greater scale, higher margins, a better track record, best-in-class management
Slide 85: Select Research Analyst Valuation Commentary (Cont'd)
Select Research Analyst Valuation Commentary (Cont’d) Source: Bank of America and Morgan Stanley. Permission neither sought nor received. “We maintain our valuation for UMG on €48bn based on 23x 2022E EV/EBITDA, a 35% premium to WMG, justified by its larger scale and sounder balance sheet” June 7, 2
Slide 86: Q&A
Q&A
Slide 87: UMG Distribution and Potential U.S. Dual Listing
On or before September 27th, Vivendi will distribute 60% of UMG’s ordinary shares to its shareholders in a taxable, in-kind, share distribution. The shares will initially trade on Euronext Amsterdam At that time, UMG will have a newly constituted independent Board of Directors UMG’s new Board may el
Slide 88: Universal Music Group Q&A
Universal Music Group Q&A
Slide 89: Detailed Transaction Overview
Detailed Transaction Overview
Slide 90: We Set Out to Accomplish the Following
We Set Out to Accomplish the Following PSTH Final Prospectus, July 21, 2020 (Emphasis added) Pershing Square Tontine Holdings, Ltd., a Delaware corporation, is a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchas
Slide 91: We Were Willing to Accept a High Degree of Complexity
We Were Willing to Accept a High Degree of Complexity for the Right Target Company PSTH Final Prospectus, July 21, 2020 We are willing to accept a high degree of situational, legal, and/or capital structure complexity in a business combination if we believe that the potential for reward justifies th
Slide 92: Background on the Transaction
During the course of our negotiations with Vivendi, we learned that they had various tax, legal, and other strategic considerations that: Precluded a “traditional” de-SPAC merger transaction Prevented Vivendi from selling more than 10% of UMG We determined that the opportunity to acquire such an ext
Slide 93: Questions Regarding the Specific Details of the Transaction Structure
In the pages that follow we outline the transaction structure on a step-by-step, granular basis We have updated previously disclosed information to reflect: Estimated dilution from the Distributable Redeemable Warrant (“DR Warrant”) Exchange Offer Restructuring of Director Warrants A more precise es
Slide 94: PSTH Will Purchase 10% of UMG from Vivendi
Pershing Square Tontine Holdings (“PSTH”) will purchase 10% of Universal Music Group (“UMG”) (184.8mm UMG shares(1)) from Vivendi for $4.0bn including estimated net transaction costs €33bn purchase price for UMG equity ($39.5bn using agreed fixed 1.20 FX rate) UMG to be publicly listed on Euronext A
Slide 95: Key Transaction Steps
PSTH has amended Sponsor and Director Warrants The Pershing Square Funds and PSTH Directors commit to exercise $1.606bn FPAs PSTH to complete Share Redemption Tender Offer PSTH to complete DR Warrant Exchange Offer PSTH to distribute Distributable Redeemable Tontine Warrants (“Tontine Warrants”) aft
Slide 96: Summary Transaction Sources and Uses
Assumes no redemptions Includes estimated transaction expenses and other costs of approximately of ~$85mm, net of PSTH cash not held in trust Summary Transaction Sources and Uses PSTH will fund $4.0bn, and the Pershing Square Funds and PSTH Directors will exercise $1.6bn of their FPAs to purchase $4
Slide 97: What Will PSTH Shareholders Receive?
What Will PSTH Shareholders Receive? SPARC Warrants to purchase SPARC shares at $20 per share Exercisable only after business combination announced $1bn – $5bn FPA Sponsor to purchase 10-year convertible preferred stock covering 4.95% of the fully diluted shares of the post-business-combination comp
Slide 98: Transaction Structure Comparison
Business Combination Merger and target share distribution Stock purchase and distribution Dilutive Sponsor Shares ~20% of SPAC Shares for de minimis consideration None Dilutive Sponsor Warrants Strike Price ~15% premium to IPO price None at UMG Post-Combination Warrants Yes None at UMG Redemption Ri
Slide 99: PSTH Today
Cash $4.0bn cash in trust Shares 200mm common shares outstanding Redemption right equal to cash in trust of $20 per share NAV / Share $20 per share Warrants ~22.2mm (1/9th) DR Warrants ~44.4mm (2/9th) Tontine Warrants Sponsor (5.95%) and Director Warrants (0.26%) FPA $3bn FPA ($1bn committed plus $2
Slide 100: Treatment of Director Warrants
Dilution 0.26% None Purchase Price ~$3mm N/A Underlying Shares 0.26% of fully diluted shares outstanding of combined business Amended 0.07% warrant applies to RemainCo only Strike Price $24.00 20% above RemainCo NAV Term 10 years from IBC 10 years from RemainCo IBC Sale Restriction 3 years from IBC
Slide 101: Treatment of Sponsor Warrants
PSTH shareholders will not be diluted by the Sponsor Warrants in connection with the UMG transaction. The Pershing Square Funds may acquire additional economic exposure to UMG by acquiring Vivendi and/or UMG securities following the distribution of UMG Shares by Vivendi Dilution 5.95% None Purchase
Slide 102: PS Funds and Directors to Exercise $1.6bn of FPAs
Current After FPA Exercised Cash $4.0bn $5.6bn Shares 200.0mm common shares outstanding ~280.3mm common shares outstanding Warrants ~66.7mm warrants ~22.2mm DR Warrants ~44.4mm Tontine Warrants ~93.4mm warrants ~31.1mm DR Warrants ~8.9mm additional DR Warrants from FPA exercise ~62.3mm Tontine Warra
Slide 103: Share Redemption Tender Offer
PSTH Redemption Tender Offer to be launched in early July The Share Redemption Tender Offer will remain open for at least 20 business days Shareholders will have the option to tender shares for a price in cash equivalent to the $20 per-share, cash-in-trust Share Redemption Tender Offer is expected t
Slide 104: Share Redemption Tender Offer (Cont'd)
C Non-tendering shareholders of record will: Maintain ownership of PSTH common shares (“RemainCo”) Maintain ownership of DR Warrants, unless previously sold, which can be exchanged in Warrant Exchange Offer Receive Tontine Warrants Receive 1 SPARC Warrant per PSTH share from Pershing Square SPARC Ho
Slide 105: Treatment of DR Warrants
PSTH to offer to exchange the ~31.1mm DR Warrants for PSTH shares following the closing of the Share Redemption Tender Offer Warrant exchange ratio will be based on the Redemption Table set forth in PSTH’s IPO Prospectus (1) 10-day VWAP prior to the launch of the Warrant Exchange Offer used to set F
Slide 106: Treatment of DR Warrants (Cont'd)
D Source: Page 166 of PSTH prospectus dated July 21, 2020 Illustratively assuming a $24.00 share price yields an exchange ratio of 0.2778 Treatment of DR Warrants (Cont’d)
Slide 107: Treatment of DR Warrants (Cont'd)
100 DR Warrants 0.2778 27 Shares PSTH Shares D Illustrative Example Treatment of DR Warrants (Cont’d) Shares per Warrant Illustrative Example Using $24.00 Fair Market Value + Fractional cash (1) A warrantholder that owns 100 warrants will receive 27 PSTH shares if they participate in the exchange of
Slide 108: Treatment of Tontine Warrants
Tontine Warrants will be distributed to non-tendering PSTH shareholders of record following Share Redemption Tender Offer, and remain outstanding at RemainCo Following distribution of the UMG shares, the Tontine Warrant exercise price will be adjusted downward (but not below zero) by the fair market
Slide 109: PSTH's Pro Forma Fully Diluted Share Count
PSTH Current Share Count 200.0 mm (+) Treatment of Director Warrants 1.2 mm (+) Treatment of Sponsor Warrants 0.0 mm (+) PS Funds and Directors Exercise $1.606bn of FPA 80.3 mm (-) Share Redemption Tender Offer 0.0 mm (+) DR Warrants Exchange Offer 8.7 mm Pro Forma Estimated PSTH Fully Diluted Share
Slide 110: UMG Share Acquisition and Trust Contribution
PSTH to contribute shares into Trust for PSTH shareholders PSTH to acquire 184.8m UMG shares for $4.0bn (€3.3bn) $23.00 UMG Share Acquisition and Trust Contribution F G 1,847.9mm UMG Shares Purchased by PSTH (1) 10% 184.8mm Per SPA, filed 6/23/2021 On or shortly after the closing of the UMG transact
Slide 111: Pro-Rata Distribution of UMG Shares
184.8mm UMG Shares Purchased by PSTH (1) 290.1mm Estimated Pro Forma PSTH Shares Outstanding 0.637 Number of UMG Shares Per Share of PSTH Total PSTH shares at closing will depend on the results of the Share Redemption Tender Offer and Warrant Exchange Offer The number of UMG shares to be distributed
Slide 112: What Will I Receive If I Own PSTH Shares?
What Will I Receive If I Own 900 PSTH Shares? Distribution of UMG Shares 900 shares x 0.637 = 573 UMG shares (1) Ongoing Interest in RemainCo 900 shares 200 Tontine Warrants (Strike-Price Adjusted) Transferable SPARC Warrants 900 SPARC Warrants to acquire 900 shares at $20 per share PSTH Shareholder
Slide 113: What Will I Receive If I Own 100 PSTH DR Warrants?
Distribution of UMG Shares 27 shares x 0.637 = ~17 UMG shares (1) Ongoing Interest in RemainCo 27 shares Transferable SPARC Warrants 27 SPARC Warrants to acquire 27 shares at $20 per share Post Warrant Exchange 27 PSTH shares PSTH Warrantholder 100 DR Warrants What Will I Receive If I Own 100 PSTH D
Slide 114: What Will PSTH Shareholders Receive?
What Will PSTH Shareholders Receive? PSTH shareholders will receive publicly traded securities in three companies: UMG, PSTH, and SPARC 1 2 3 SPARC Warrants to purchase SPARC shares at $20 per share Continued ownership of RemainCo (Shares and Tontine Warrants) A pro-rata share of UMG, an independent
Slide 115: $13.91 Cost Basis per PSTH Share for Equity Interest in UMG
$13.91 cost basis per PSTH share for equity interest in UMG JPMorgan’s June 16th, 2021 research note implies a UMG equity value of $20.20 per PSTH share (1) Equity of UMG represents an interest in: €32bn for UMG’s operating business €2bn Net debt: €1bn of cash, €3bn of debt and pension liabilities T
Slide 116: UMG Summary Purchase Price Per PSTH Share
UMG Summary Purchase Price Per PSTH Share 1 €33bn for UMG’s operating business and investments equates to a cost basis of $13.91 per PSTH share
Slide 117: UMG's Share Capital
UMG’s Share Capital 1 Per SPA, filed 6/23/2021 PSTH’s purchase price implies €17.81 per share for UMG’s ordinary shares JPMorgan’s valuation implies a 45% per share premium to PSTH’s cost PSTH’s Equity Purchase Price at Cost UMG Share Price at PSTH cost €32.9bn €17.81 1,847.9mm UMG’s Projected Share
Slide 118: UMG Ownership Post Distribution
Assumes no redemptions Per Vivendi press release dated May 18, 2021 On or before September 27th, Vivendi will distribute 60% of UMG’s ordinary shares to its shareholders in a taxable, in-kind, share distribution. The shares will initially trade on Euronext Amsterdam Post distribution by Vivendi and
Slide 119: What Will PSTH Shareholders Receive?
What Will PSTH Shareholders Receive? PSTH shareholders will receive publicly traded securities in three companies: UMG, PSTH, and SPARC 2 Continued ownership of RemainCo (Shares and Tontine Warrants) 3 SPARC Warrants to purchase SPARC shares at $20 per share 1 A pro-rata share of UMG, an independent
Slide 120: Trust for PSTH Shareholders
On or shortly after the closing of the UMG transaction, the acquired UMG shares will be placed into a Trust Beneficial interests in the Trust will be owned pro rata by PSTH shareholders as of the Distribution Record Date The Distribution Record Date will be after the closing of the Warrant Exchange
Slide 121: RemainCo Overview
$1.6bn in cash plus $1.4bn additional FPA from the Pershing Square Funds Will be the largest publicly traded acquisition company Will pursue a business combination with an operating business, which will not be a share purchase of a minority position Pershing Square Funds will own 28.4% before the ex
Slide 122: Pro Forma RemainCo Summary Capital Structure
2 Pro Forma RemainCo Summary Capital Structure Cash ~$1.6bn cash Shares 290.1mm pro forma fully diluted shares outstanding To be reduced to 72.5mm following a 1-for-4 reserve stock split NAV / Share $5.42 per share Will become $21.67 per-share following a 1-for-4 reserve stock split Warrants Assumin
Slide 123: RemainCo Is a Highly Attractive Merger Partner
RemainCo Is a Highly Attractive Merger Partner 2 While RemainCo will be the largest acquisition company, its size ($1.6bn) allows for many opportunities Flexibility to scale up to $3.0bn based on full exercise of $1.4bn FPA allows for larger deals RemainCo has high deal certainty No redemption risk
Slide 124: RemainCo Is Ready to Transact
RemainCo Is Ready to Transact 2 Become a public company Raise $1.6bn to $3.0bn, or more, of capital Partner with a world-class group of shareholders Gain certainty regarding transaction timing, cash at closing, and shareholder base Simple, predictable, free-cash-flow-generative Formidable barriers t
Slide 125: What Will PSTH Shareholders Receive?
PSTH shareholders will receive publicly traded securities in three companies: UMG, PSTH, and SPARC 1 3 SPARC Warrants to purchase SPARC shares at $20 per share Continued ownership of RemainCo (Shares and Tontine Warrants) A pro-rata share of UMG, an independent publicly traded company 2 What Will PS
Slide 126: SPARC: Opt-In SPAC Structure
Is an “opt-in” SPAC which will seek a merger with a private operating company SPARC structure eliminates shareholder opportunity cost of capital and time pressure associated with typical two-year SPAC commitment period SPARC common stock will become publicly traded only after: (1) a business combina
Slide 127: SPARC Resolves Remaining SPAC Issues
SPARC Resolves Remaining SPAC Issues 3 Funding is delayed until we have identified a target, conducted due diligence, and received necessary shareholder approvals SPARC Warrant structure allows for opportunistic deployment Rewards loyal PSTH shareholders with the right to invest in our next target O
Slide 128: Universe of Targets
High-Quality IPO Candidates Corporate Carve-Outs Mature Unicorns Family-owned Companies Private Equity or Distressed Companies Universe of Targets We expect to find high-quality targets that meet our criteria in five principal market segments IPO 3
Slide 129: Illustrative Summary Timeline
Illustrative Summary Timeline (Estimated Dates, Subject to Change) Offer Launch Offer Close Record Date Key Event FPAs Exercised (Late Aug to Early Sep) Distribution of 10% of UMG Shares to PSTH Shareholders Distribution of SPARC Warrants (1-Day Following Record Date) Distribution of Tontine Warrant
Slide 130: Disclaimer: Important Additional Information
Disclaimer Important Additional Information This presentation does not constitute an offer to sell or buy or the solicitation of an offer to buy or sell any securities. The proposed transactions described in this presentation have not yet commenced, may proceed on materially different terms and may
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