Hipgnosis Songs Fund has agreed to a $1.4billion (£1.1billion) acquisition by Concord Chorus following a tumultuous period for the listed music rights investor.
Concord’s parent company is Alchemy Copyrights is the owner of Hipgnosis rival Round Hill Music, which controls the back catalogues of composers Stephen Sondheim and Neil Sedaka, and trip-hop band Massive Attack.
The music royalties owner told investors on thursday Concord will pay $1.16 (93p) per share, a representing a 32 per cent premium to its closing share price on Wednesday.
Don’t Stop: Hipgnosis has spent more than $2billion acquiring the back catalogues of artists like Fleetwood Mac’s Christine McVie (pictured)
It said the takeover of Hipgnosis aligned with a ‘long-standing objective to acquire high quality and long-term music assets’ and would be supported with financing from private equity giant Apollo Global Management.
The deal has received support from 29.4 per cent of Hipgnosis shareholders and is unanimously recommended by the London-listed group’s board.
Hipgnosis Songs Fund shares soared 30.2 per cent to 91.8p just before midday on Thursday.
Hipgnosis was co-founded in 2018 by Chic guitarist Nile Rodgers and Canadian-born Merck Mercuriadis, who previously managed musicians like Iron Maiden, Guns ‘N’ Roses and Sir Elton John.
It has spent more than $2billion acquiring the back catalogues of artists like Shakira, Blondie, Red Hot Chili Peppers, and Fleetwood Mac’s Christine McVie and Lindsay Buckingham.
The company, named after the art design group behind iconic album covers such as Pink Floyd’s Dark Side of The Moon, earns royalties every time a song whose rights it owned is played.
Started: Hipgnosis was co-founded by Merck Mercuriadis and Chic guitarist Nile Rodgers
However, the value of these catalogues has declined due to interest rate hikes reducing the attractiveness of royalties relative to other asset classes like bonds.
Troubles intensified for Hipgnosis last October when it attempted to sell some of its music catalogues for £362million to funds advised by American investment manager Blackstone in order to reduce debts and fund a share buyback.
At an extraordinary general meeting, investors voted overwhelmingly against both the sale and Hipgnosis’s continuation as a closed-ended investment business.
Just before that, Hipgnosis launched a strategic review and cancelled dividend payments after being informed that its royalty payments would be much lower than expected.
Since then, the group has been in a row with its investment adviser, Hipgnosis Song Management (HSM), whose chairman is founder Merck Mercuriadis.
Robert Naylor, chairman of Hipgnosis, said the Concord offer was 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.’
He asked HSM to support an ‘orderly termination’ of its advisory agreement as it would result in higher payouts and ‘bring to an end a period of uncertainty’ for all the firm’s stakeholders.
Last month, an independent report by fund Shot Tower Capital accused HSM of falling short of music industry standards when advising HSF, which led to the group overpaying for most of its music catalogues.
It also alleged that HSM used revenue recognition policies and accrual estimates that overstated revenue and earnings.
Russ Mould, investment director at AJ Bell, said: ‘Understandably, the relationship between the trust’s board and HSM is frosty, to say the least.
‘Industry analysts said it was not a case of ‘if’ but ‘when’ HSM would be fired as investment adviser. Mercuriadis has his reputation to protect and is unlikely to let go without a fight, so sit back and wait for the post-credits scene to unfold.’
