Hipgnosis Songs Fund, the British company that helped reignite the music industry’s catalog rush – acquiring tens of thousands of songs by Justin Bieber, Neil Young, Shakira and others – but which has seen the course of its shares falling, reached an agreement in principle to sell itself to Concord, a major independent music company, for $1.4 billion.
Hipgnosis, listed on the London Stock Exchange, said on Thursday its board had given unanimous approval. But the deal still faces what could be a significant hurdle in the form of a contractual option held by an affiliate to buy the catalog at a fixed price.
Robert Naylor, chairman of Hipgnosis, said in a statement: “The acquisition represents an attractive opportunity for our shareholders to realize their stake immediately at a premium, thereby mitigating the risks we envisage in achieving a material improvement in the share price. the action. »
Bob Valentine, chief executive of Concord, which has a portfolio of labels including Stax and Craft, and significant interests in music publishing, added: “We believe we can integrate Hipgnosis’ catalogs into our broader portfolio of 1.2 million songs in a way that will “benefit composers, performers and all our stakeholders.” »
Concord’s cash offer of $1.16 per share represents a 32% premium to Hipgnosis’s last closing price, although it is still down nearly 28% from at the November 2021 stock peak.
The Concord acquisition, if it goes through, would end one of the most tumultuous stories in recent music business history. Hipgnosis, founded by Merck Mercuriadis, a longtime music executive who once managed superstar acts like Beyoncé, Guns N’ Roses and Elton John, went public in 2018, with a splashy pitch to investors — and artists — according to which royalties from popular artists’ copyrights the songs could be “more valuable than gold or oil.»
The company spent approximately $2.2 billion on catalog acquisitions, with top artists like Bieber receiving up to $200 million for the rights to their songs. As recently as last September, the value of the Hipgnosis catalog was estimated at $2.6 billion by an independent financial firm.
In doing so, Mercuriadis became something of a celebrity on the business side of music. Always appearing in a black Prada jacket, he presented himself as a sympathetic defender of artists and a vocal critic of major music conglomerates. Mercuriadis also talked about using Hipgnosis’ influence in the market to promote better financial deals for songwriters overall.
“People think of songs as inanimate objects; “No,” he told The New York Times in a 2020 interview. “I think they are the great energy that makes the world go round, and I think they deserve to be managed with the same level of responsibility that human beings assume.
In the company’s complex structure, Hipgnosis Songs Fund, the listed entity, is an “investment trust” that owns the rights to the songs, while a separate company, Hipgnosis Song Management, owned by Mercuriadis and the company giant investment company. black stone – is its “investment advisor,” doing much of the work in acquiring these assets.
Over the past two years, as interest rates rose, the company’s stock price fell. In October, after the company suspended its dividend, shareholders voted against continuing the company’s structure as an investment company, triggering a strategic review and valuation of its assets by a new advisor financial.
This assessment, announced in March, reduced the value of Hipgnosis’ assets by 26 percent, to just under $2 billion, and proposed a harsh criticism of its business practices. Hipgnosis Song Management, according to the review, had overpaid for the majority of its catalog and overestimated the fund’s revenues and profits; and Hipgnosis Songs Fund had overestimated its stakes in many songs.
In announcing its deal with Concord, Hipgnosis said it would “encourage” the investment adviser to terminate its so-called call option, which gives it the right to match any third-party offers. Hipgnosis Song Management did not immediately respond to request for comment.
