Billionaire investor Bill Ackman’s hedge fund has made an offer to acquire Universal Music Group (UMG) in a transaction that values the world’s largest music company at approximately €55bn (£48bn).

Pershing Square, the New York-based investment firm, has proposed a cash-and-stock takeover of the company, whose artists include global names such as Taylor Swift and Elton John.

In a statement, Ackman said that under the leadership of British-born Sir Lucian Grainge, the company had done “an excellent job” developing a world-class roster of artists and delivering strong operating results. However, he argued that UMG’s share price had underperformed due to factors “unrelated to the performance of its music business”.

UMG shares, which have traded in Amsterdam since 2021, have fallen by more than 25% over the past year. Following news of Pershing Square’s proposal, the stock rose 11% on Tuesday.

The company is one of the “big three” global record labels, alongside Sony Music Entertainment and Warner Music Group. Its catalogue spans multiple genres, from classical performers to internationally recognised artists such as Adele, Drake and Ariana Grande.

Ackman attributed the company’s weaker share performance in part to delays in securing a US listing, what he described as inefficient use of its balance sheet, and uncertainty surrounding the 18% stake held by the French conglomerate Bolloré Group.

Bolloré Group, controlled by billionaire Vincent Bolloré, is UMG’s largest individual shareholder. Vivendi, another investment company under the Bolloré family’s control, holds an additional 10% stake.

Ackman also pointed to what he described as insufficient investor recognition of UMG’s €2.7bn holding in the music streaming platform Spotify.

Pershing Square, founded by Ackman in 2004, manages more than $26bn in assets. The fund acquired a 10% stake in UMG in 2021. Ackman stepped down from the company’s board last year, citing other professional obligations.

Dan Coatsworth, head of markets at AJ Bell, said Ackman would need to mount “a full-scale charm offensive” to persuade UMG’s key shareholders to support the proposal.

“Bill Ackman has long admired Warren Buffett’s approach of identifying quality businesses that appear undervalued and acquiring them outright. With this bid for Universal Music Group through a Pershing Square vehicle, he is clearly following that playbook,” Coatsworth said.

Although Ackman praised Grainge and his executive team for their leadership, the proposed transaction would involve appointing veteran talent agent Michael Ovitz as chair, along with two Pershing Square representatives joining the board.

The offer would also require negotiating a new employment agreement and compensation structure for Sir Lucian Grainge, Ackman said in a letter addressed to UMG’s board.

Grainge received total compensation of more than €41m last year, including a base salary of €4.4m and bonuses exceeding €30m.

Under the proposal, UMG would merge with a special-purpose acquisition company established by Pershing Square and subsequently seek a listing on the New York Stock Exchange. Shareholders would receive €9.4bn in cash collectively and 0.77 shares in the newly formed entity for each existing UMG share. Pershing stated that the combined consideration represents a 78% premium to the company’s closing share price on Thursday.

UMG declined to comment on the proposal.