Vivendi, the parent company of Santa Monica-based Universal Music Group, sold a 7.1% stake in UMG for $2.8 billion to Pershing Square Holdings Ltd., an investment firm managed by billionaire Bill Ackman.

The deal, which was announced Aug. 10, also gives Ackman and Pershing Square the opportunity to buy an additional 2.9% of UMG by Sept. 9.
 
The transaction values UMG at about $41 billion. In April, Goldman Sachs & Co. had valued the world’s largest music company at $53 billion.
 
“Vivendi is very satisfied with the arrival at UMG of Mr. Ackman, a major American investor, providing once again evidence of the music company’s global success and attractiveness,” the French media conglomerate said in a statement announcing the deal.

UMG is the world’s largest music company, with artists such as Billie Eilish, Post Malone, Lady Gaga and the Rolling Stones.
 
French media giant Vivendi plans an initial public offering for UMG in September. Vivendi is expected to retain a minority ownership stake in the label following the IPO.

Ackman initially announced plans in June to become a long-term investor in Universal Music Group through his special purpose and acquisition company Pershing Square Tontine Holdings Ltd.
 
He had drafted a first-of-its-kind approach for the Universal Music deal with the intention of taking a 10% stake in the company while seeking another business to combine it with through an acquisition.
 
Ackman decided not to move forward with that deal after the Securities and Exchange Commission raised concerns about the uniqueness and complexity of the plan. Instead, Ackman this month used his hedge fund to buy a stake in UMG directly.

Ackman, the co-founder of investment firm Gotham Partners, started Pershing Square Capital Management in 2004 with $54 million culled from his personal funds and from his former business partner, Leucadia National Corp.
 
The company invested in blue-chip businesses such as Wendy’s Co. and Target Corp. before launching the closed-end fund Pershing Square Holdings in 2012. The fund went on to raise $3 billion in an October 2014 IPO.

Considered one of the “Big Three” record labels along with Sony Music and Warner Music Group, UMG’s assets have steadily grown thanks to acquisitions of legacy labels like EMI. UMG also has exclusive publishing agreements with artists like Taylor Swift, who extended her partnership with the company in 2020. The label expanded its reach on social media in June by striking a deal with Santa Monica-based Snap Inc. to allow the company access to its catalog for Snap’s in-app Sounds, Playlist and Search features.