US private equity group Blackstone has made a move for Hipgnosis.
Following the board’s acceptance of an offer by Concord on Thursday (April 18) that valued the music rights investment fund at $1.4 billion, Blackstone has made a rival proposal to trump that by around £100m. A formal offer could arrive in the next few days.
In a statement on Sunday (April 21), the board of Hipgnosis Songs Fund said that, having reviewed the Blackstone proposal with its financial adviser Singer Capital Markets, it "has indicated to Blackstone that the proposal is at a value that it would be minded to recommend to its shareholders should Blackstone announce a firm intention to make an offer".
"The board and its advisers will continue to provide Blackstone and its advisers access to confirmatory due diligence, to enable Blackstone to announce a firm intention to make an offer, as soon as possible," added the Hipgnosis Songs Fund statement. Hipgnosis' board continues to recommend the Concord offer to shareholders as there is not yet a firm offer from Blackstone.
It now remains to be seen if Blackstone’s emergence as a possible buyer prompts a bidding war for Hipgnosis, or if an acquisition can be agreed in the coming days.
The Hipgnosis Songs Fund catalogue includes shares in songs and catalogues by artists including Shakira, Journey, Ed Sheeran, Neil Young, Christine McVie, Lindsey Buckingham, Blondie, Nile Rodgers, Pusha T, and dozens more.
Blackstone’s proposal to the Hipgnosis Songs Fund (HSF) board is worth $1.24 per share in cash, compared to the Concord Chorus offer of $1.16 per share.
A substantial minority of shareholders (around 29%) have already accepted the offer from Concord, which last year acquired Round Hill Music. The formal Concord offer for the publicly listed company is subject to a vote by all shareholders.
It has now emerged that, prior to the Concord offer being accepted by the board, Blackstone had tabled three proposed offers for Hipgnosis Songs Fund during the period following the strategic review into the investment trust. When it accepted Concord’s offer, the HSF board only confirmed that it had been approached by “several interested parties”.
In a statement regarding the improved offer on Saturday (April 20), Blackstone Europe said: “Blackstone strongly encourages the board of Hipgnosis to recognise the significant increase in value available to all shareholders under the terms of its fourth proposal, over the $1.16 as set out in the Concord offer, and to work with Blackstone to reach agreement on a unanimously recommended firm offer in an expeditious manner.”
The private equity firm is already partnered with HSF’s investment adviser, Hipgnosis Song Management (headed by Merck Mercuriadis), on Hipgnosis Songs Capital, a separate fund that is privately held.
Blackstone strongly encourages the board of Hipgnosis to recognise the significant increase in value available to all shareholders
Blackstone
As reported by Music Week, Hipgnosis Song Management (HSM) has an option to purchase the entire portfolio of songs held by the main Hipgnosis Songs Fund within six months of any termination of its investment advisory agreement.
Following the offer from Concord on April 18, Hipgnosis Songs Fund chair Robert Naylor urged HSM and Mercuriadis to agree to an “orderly termination” of the investment advisory agreement.
“We would now encourage Hipgnosis Song Management, the company’s investment adviser and Blackstone, which is HSM’s majority owner, through funds they manage and/or advise, to agree an orderly termination of the investment advisory agreement,” said Naylor on April 18. “This would enable the payment of a larger consideration under the agreed transaction with Concord and bring to an end a period of uncertainty for all Hipgnosis stakeholders.”
Blackstone became an investor in Hipgnosis Song Management in 2021. It has now clearly signalled that, if any formal offer for the main fund does not progress, then the call option held by HSM could be enforced.
Blackstone, in its April 20 statement (named Project Eclipse), said: “Blackstone notes that under the terms of the investment advisory agreement between Hipgnosis Song Management Limited, as investment adviser, and Hipgnosis, dated 27 June 2018 (as amended), on termination of the IAA, HSM has an option, exercisable at any point in time during the six-month period following the effective date of termination of the IAA, to purchase from Hipgnosis the entire portfolio of songs held as at the termination date.
“Blackstone and its portfolio company HSM, having taken extensive legal advice, remain confident in the enforceability of the option. Blackstone is seeking to find a positive outcome for all shareholders at a fair and reasonable value; however, Blackstone and HSM value the contractual protections under the IAA and will vigorously defend HSM’s rights pursuant to the option if required to do so.”
However, that could lead to a legal dispute if the board challenged the contractual agreement between HSF and HSM, in the event that Blackstone's offer did not progress.
Merck Mercuriadis founded Hipgnosis Songs Fund in 2018, at a time when music publishing rights were increasing in value as an asset class in the streaming era. He appeared on the cover of Music Week the following year to set out his vision for the songs fund that he managed.
Mercuriadis stepped down as chief executive of Hipgnosis Song Management in February, moving to the role of chair. Ben Katovsky, who took on the role of HSM CEO, would continue to manage the HSF catalogues if Blackstone did take control of the songs fund.
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