The efforts by Hipgnosis’ board to encourage a bid for the music investment fund have today resulted in an accepted offer of $1.4 billion from Concord.
Following a tumultuous six-month period in which the board was openly critical of its investment adviser, Hipgnosis Song Management (headed by Merck Mercuriadis), a bid has been made for the songs fund by the Nashville-based independent music giant. Concord has a wider portfolio of 1.2 million songs.
The Hipgnosis 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.
The Concord offer is made by Concord Chorus, backed by Alchemy Copyrights, which acquired Round Hill Music last year. Robert Naylor, then chair of Round Hill, has since taken up the same role at Hipgnosis, where he’s been working to attract a bid for the fund.
“Concord and its management have followed the progression of Hipgnosis since IPO and believe that Hipgnosis’ assets complement Concord’s long-standing objective to acquire high quality and long-term music assets,” said a statement on the Stock Exchange. “Concord believes that the quality of Hipgnosis’ assets are consistent with Concord’s existing holdings, and creators connected to the rights acquired will benefit from the services of Concord’s existing creative and administrative support teams globally.”
Apollo Global Management will finance the acquisition through debt and an indirect minority interest.
Hipgnosis Songs Fund had to launch a strategic review last year following a shareholder vote, which halted a proposed catalogue sale and also saw the exit of the chair Andrew Sutch.
The board of Hipgnosis Songs Fund has accepted the $1.16 offer per share from Concord. The bid will now be put to a shareholder vote.
The offer represents a premium of more than 30% on the closing share price on Wednesday. Shares in Hipgnosis have today leaped 31% in early trading upon news of the offer.
We believe we can integrate Hipgnosis’ catalogues into our wider portfolio of 1.2 million songs in a way that will deliver benefits for composers, performers and all our stakeholders
Bob Valentine
The only complication is the call option held by Merck Mercuriadis and Hipgnosis Song Management (backed by Blackstone), which gives them an opportunity to acquire the fund. It now remains to be seen if they will match the offer to shareholders or walk away. Hipgnosis Song Management continues to have the separate, Blackstone-backed Hipgnosis Songs Capital as a client. The private entity is separate to the publicly-listed Hipgnosis Songs Fund.
Under the terms of the Concord offer, shareholders will be entitled to share in an aggregate additional consideration of up to $25 million if the investment advisory agreement (including that call option) is terminated prior to a court hearing to complete the acquisition.
Robert Naylor, chairman of Hipgnosis, urged Hipgnosis Song Management and Mercuriadis to agree to an “orderly termination” of the investment advisory agreement.
“The board is pleased to announce and unanimously recommend this $1.4 billion offer for Hipgnosis from Concord,” said Naylor. “The acquisition represents an attractive opportunity for our shareholders to immediately realise their holding at a premium, mitigating the risks we see ahead to achieving a material improvement in the share price. At the same time, the board is confident that Concord, one of the world’s leading independent music companies, is the right owner to take on the Hipgnosis catalogue and manage it in the interests of composers and performers.
“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. 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.”
Bob Valentine, CEO of Concord, said: “We are pleased to be announcing this offer for Hipgnosis, which has been unanimously recommended by its board and has the support of 29.38% of their shareholders. We believe we are offering a fair price for Hipgnosis’ catalogues and music assets, giving its shareholders the opportunity to realise their investment at a significant premium to the prevailing share price in cash.
“Concord is the world's leading independent music company, with extensive experience in developing, producing, and marketing recordings and songs around the world in order to maximise their value. We believe we can integrate Hipgnosis’ catalogues into our wider portfolio of 1.2 million songs in a way that will deliver benefits for composers, performers and all our stakeholders."
(Note: This article previously transposed a UK sterling valuation figure into the headline expressed in US dollars – this has now been corrected.)
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