Hipgnosis board unable to find better offer in $440m song sale
Daniel O'Boyle
Tue, 24 October 2023
The board of the Hipgnosis Songs Fund says it has been unable to find a better offer for the collection of hits it agreed to sell to a sister fund for $440 million (£359 million), as a crucial vote on its future approaches.
The fund known for buying up the rights to pop stars’ work last month revealed plans to offload songs by artists such as Nelly, Rick James and Shakira to another fund, owned by Blackstone and managed by a team led by Hipgnosis founder Merck Mercuriadis.
The Hipgnosis fund said it sold the songs to return cash to shareholders because its share price didn’t reflect the value of its portfolio. But the deal drew criticism from some shareholders, who raised questions over the price and the connections between the two funds.
That prompted the fund’s board to shop the songs around, contacting 17 different parties in search of a better offer. But today it said it has not received a binding offer, as possible bidders said they “could not justify paying a higher price” than the original deal.
Shareholders will vote on the deal on Thursday, alongside a vote on continuation of the fund itself. Relations with shareholders weren’t helped when Hipgnosis revealed earlier this month that it would have to pull its dividend, because a lower-than-expected windfall from a recent US Copyright Royalties Board decision on streaming royalties meant it couldn’t hand the money back to shareholders without breaching agreements with its lenders.
In an attempt to fight off a revolt, the fund launched a strategic review last week, which will look at a range of options including kicking out Mercuriadis.
Shares lost as much as 3.5% today to 72.8p. That values the fund at £878 million, or less than half of the most recent assessed value of its portfolio.
Daniel O'Boyle
Tue, 24 October 2023
The board of the Hipgnosis Songs Fund says it has been unable to find a better offer for the collection of hits it agreed to sell to a sister fund for $440 million (£359 million), as a crucial vote on its future approaches.
The fund known for buying up the rights to pop stars’ work last month revealed plans to offload songs by artists such as Nelly, Rick James and Shakira to another fund, owned by Blackstone and managed by a team led by Hipgnosis founder Merck Mercuriadis.
The Hipgnosis fund said it sold the songs to return cash to shareholders because its share price didn’t reflect the value of its portfolio. But the deal drew criticism from some shareholders, who raised questions over the price and the connections between the two funds.
That prompted the fund’s board to shop the songs around, contacting 17 different parties in search of a better offer. But today it said it has not received a binding offer, as possible bidders said they “could not justify paying a higher price” than the original deal.
Shareholders will vote on the deal on Thursday, alongside a vote on continuation of the fund itself. Relations with shareholders weren’t helped when Hipgnosis revealed earlier this month that it would have to pull its dividend, because a lower-than-expected windfall from a recent US Copyright Royalties Board decision on streaming royalties meant it couldn’t hand the money back to shareholders without breaching agreements with its lenders.
In an attempt to fight off a revolt, the fund launched a strategic review last week, which will look at a range of options including kicking out Mercuriadis.
Shares lost as much as 3.5% today to 72.8p. That values the fund at £878 million, or less than half of the most recent assessed value of its portfolio.
BLACKSTONE-BACKED $440M ACQUISITION OFFER FOR HIPGNOSIS SONGS FUND ASSETS SEES OFF RIVAL INTEREST
Taylor Swift's Me! is one of four songs on her Lover album co-written by Joel Little, whose catalog is part of the portfolio being bid on by Blackstone-backed Hipgnosis Songs Capital
OCTOBER 24, 2023
BY TIM INGHAM
Last month, MBW broke the news that there was some interesting goings-on at Hipgnosis.
As reported, Blackstone-backed Hipgnosis Songs Capital (HSC) launched a bid to acquire 29 catalogs from UK-listed Hipgnosis Songs Fund (HSF) for USD $440 million.
These 29 catalogs include shares in hits performed by Taylor Swift and Lorde (Joel Little) as well as by Justin Bieber (Poo Bear), plus shares in the songwriting catalogs of stars such as Shakira, Rick James and Barry Manilow.
The $440 million offer price represented a multiple of 18.3x historical Net Publisher Share (NPS) of the catalogs, and a rise of +26% vs. the price paid by HSF for their original acquisition.
Sat in the middle of this activity was Hipgnosis Song Management (HSM), the investment adviser to both HSC and HSF.
HSM’s CEO – Merck Mercuriadis – explained at the time that he had “consulted with many of [HSF’s] largest shareholders” ahead of the $440 million acquisition bid.
Mercuriadis further explained that the primary benefit of a successful acquisition from an HSF shareholder’s perspective was that it would “release cash enabling [HSF] to reduce debt and ‘buy back’ shares in the market”, which would then potentially lead to a market ‘re-rating’ of HSF’s share price.
(As those of you following this story will know, HSF’s share price is currently trading at around half the size of the value placed on it by independent valuer, Citrin Cooperman. Blackstone’s $440 million bid for the 29 catalogs represents a 17.5% discount on this portfolio’s price as per this independent valuation.)
However, there was a big caveat to HSC’s bid to acquire these rights: To ensure that HSC’s offer was competitive, HSF entered into an independent ‘go shop’ period, in which it solicited bids from other parties to – effectively – see if that $440 million offer could be beaten.
It couldn’t.
In a note to shareholders today (October 24) , HSF’s board said that “following substantive engagement with a number of parties”, it did not receive a “Superior Offer” as part of the ‘go shop’ process.
HSF’s board said in a shareholder update that it had “received feedback through the process [from] a number of the parties assessed that they could not justify paying a higher price” than the $440 million offer from HSC.
(HSC had a ‘matching right’ if a superior bid was made, meaning that it could have raised its own bid offer to gazump any rival approaches at a higher price.)
In total, HSF’s board says it was in contact with 17 parties at the beginning of the ‘go shop’ process. Eight parties then signed NDAs, before one – non-binding – offer was made.
And that was the end of that.
This is another interesting chapter in the story of Hipgnosis Songs Fund, which has been a point of fixation for the financial pages of UK newspapers in the past two weeks. (HSF trades on the London Stock Exchange.)
On Thursday (October 26), HSF will hold shareholder votes on two crucial topics:Whether or not to accept Blackstone/HSC’s $440 million offer for the 29 catalogs;
Whether or not HSF should continue in its current form – a decision that will be reached via a ‘continuation vote’ amongst shareholders
Regardless of the way the votes move on these two issues, Merck Mercuriadis (via HSM) holds an ongoing “call option” to acquire the assets of Hipgnosis Songs Fund should HSF terminate the contract of HSM as its investment adviser.
As MBW reported last week, a “call option” is an agreement that sees a potential buyer (in this case HSM) able to acquire assets at a previously-specified price from a potential seller (in this case HSF).Music Business Worldwide
Taylor Swift's Me! is one of four songs on her Lover album co-written by Joel Little, whose catalog is part of the portfolio being bid on by Blackstone-backed Hipgnosis Songs Capital
OCTOBER 24, 2023
BY TIM INGHAM
Last month, MBW broke the news that there was some interesting goings-on at Hipgnosis.
As reported, Blackstone-backed Hipgnosis Songs Capital (HSC) launched a bid to acquire 29 catalogs from UK-listed Hipgnosis Songs Fund (HSF) for USD $440 million.
These 29 catalogs include shares in hits performed by Taylor Swift and Lorde (Joel Little) as well as by Justin Bieber (Poo Bear), plus shares in the songwriting catalogs of stars such as Shakira, Rick James and Barry Manilow.
The $440 million offer price represented a multiple of 18.3x historical Net Publisher Share (NPS) of the catalogs, and a rise of +26% vs. the price paid by HSF for their original acquisition.
Sat in the middle of this activity was Hipgnosis Song Management (HSM), the investment adviser to both HSC and HSF.
HSM’s CEO – Merck Mercuriadis – explained at the time that he had “consulted with many of [HSF’s] largest shareholders” ahead of the $440 million acquisition bid.
Mercuriadis further explained that the primary benefit of a successful acquisition from an HSF shareholder’s perspective was that it would “release cash enabling [HSF] to reduce debt and ‘buy back’ shares in the market”, which would then potentially lead to a market ‘re-rating’ of HSF’s share price.
(As those of you following this story will know, HSF’s share price is currently trading at around half the size of the value placed on it by independent valuer, Citrin Cooperman. Blackstone’s $440 million bid for the 29 catalogs represents a 17.5% discount on this portfolio’s price as per this independent valuation.)
However, there was a big caveat to HSC’s bid to acquire these rights: To ensure that HSC’s offer was competitive, HSF entered into an independent ‘go shop’ period, in which it solicited bids from other parties to – effectively – see if that $440 million offer could be beaten.
It couldn’t.
In a note to shareholders today (October 24) , HSF’s board said that “following substantive engagement with a number of parties”, it did not receive a “Superior Offer” as part of the ‘go shop’ process.
HSF’s board said in a shareholder update that it had “received feedback through the process [from] a number of the parties assessed that they could not justify paying a higher price” than the $440 million offer from HSC.
(HSC had a ‘matching right’ if a superior bid was made, meaning that it could have raised its own bid offer to gazump any rival approaches at a higher price.)
In total, HSF’s board says it was in contact with 17 parties at the beginning of the ‘go shop’ process. Eight parties then signed NDAs, before one – non-binding – offer was made.
And that was the end of that.
This is another interesting chapter in the story of Hipgnosis Songs Fund, which has been a point of fixation for the financial pages of UK newspapers in the past two weeks. (HSF trades on the London Stock Exchange.)
On Thursday (October 26), HSF will hold shareholder votes on two crucial topics:Whether or not to accept Blackstone/HSC’s $440 million offer for the 29 catalogs;
Whether or not HSF should continue in its current form – a decision that will be reached via a ‘continuation vote’ amongst shareholders
Regardless of the way the votes move on these two issues, Merck Mercuriadis (via HSM) holds an ongoing “call option” to acquire the assets of Hipgnosis Songs Fund should HSF terminate the contract of HSM as its investment adviser.
As MBW reported last week, a “call option” is an agreement that sees a potential buyer (in this case HSM) able to acquire assets at a previously-specified price from a potential seller (in this case HSF).Music Business Worldwide
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