- Blackstone eyes £1.2 billion takeover of music company
- Previous offers for Hipgnosis Songs Fund considered for acquisition
- Delicate balance in ongoing legal disputes and potential offers
Blackstone, a behemoth in private equity, has already presented the owner of compositions performed by Shakira and the Red Hot Chilli Peppers with multiple offers.
This weekend, the Blackstone investment behemoth is formulating plans for a £1.2 billion takeover of the proprietor of the music company that Blondie, the Kaiser Chiefs, and the Red Hot Chilli Peppers perform on.
Blackstone has previously presented multiple acquisition proposals for Hipgnosis Songs Fund (HSF), a music rights investment company listed in London.
According to sources with knowledge of the matter, the initial offer was valued at 82p per share, another was proposed at 88p, and the most recent was worth just under the 93.2p-per-share proposal for HSF that Concord Chorus, a music and theatrical rights company, unveiled on Thursday.
Blackstone, which is advised by investment advisers at Jefferies, is reportedly contemplating a higher offer for HSF, which is traded under the symbol SONG on the London Stock Exchange.
One further stated that Blackstone was “surprised” by the board of SONG’s recommendation of Concord Chorus’s (sponsored by Apollo Global Management) offer this week, considering the company’s ongoing discussions regarding an offer.
Additionally, the individual raised concerns regarding HSF’s recommendation of a proposal “at the onset of a competitive bidding process, without making an effort to maximise shareholder value.
An HSF-affiliated source refuted this characterization.
A takeover of the company would significantly enhance the value for shareholders of Hipgnosis. In March, the company’s shares plummeted to a record low of approximately 56p due to a decrease in portfolio value and a suspension of dividend disbursements.
The public spectacle has witnessed HSF’s travails for several months, culminating in an October decision by shareholders to refuse the board’s attempt to secure their support for the company’s continuation.
The organization has encountered intense criticism and legal disputes concerning its operations and management.
In March, Shot Tower Capital, a specialist adviser, concluded that the value of SONG’s assets was one-fifth lower than what its investment adviser, Hipgnosis Song Management (HSM), had estimated for September.
With a 51% stake in HSM, which is under contract to administer the SONG assets, Blackstone is already intimately acquainted with the future of HSF.
HSF could potentially recover up to $25 million if HSM terminated the agreement, although analysts are uncertain as to why HSM would voluntarily forego any funds it considers to be owed to it.
A challenge that Blackstone encounters about any potential new offer is the circumstance that the Concord Chorus proposal has been unconditionally accepted by more than 23% of shareholders, as reported by the SONG board.
Those diminish solely if a competing bidder presents an offer of at least 10% greater, which in this instance exceeds 102p per share.
However, HSM’s management agreement with HSF also includes a call option that permits it to acquire the portfolio of music assets at the same price it pays, even if Concord Chorus is successful.
It is understood that the call option will expire if the management contract is terminated for a reason.
As a result of the insiders’ knowledge of the legal disputes involving the companies, the situation is delicately balanced; investors have also proposed a potential compromise agreement between them.
A Blackstone insider stated that the company was extremely assured of its contractual standing.
Included among the artists whose catalogs the listed company possesses are Neil Young and Mark Ronson.
Merck Mercuriadis, a former manager of Beyonce and Sir Elton John, possesses the remaining portion of HSM. In 2018, he introduced Hipgnosis to mainstream music royalties as an asset class.
Three years later, he reached a $1 billion agreement with Blackstone to provide firepower for purchasing music rights and administering catalogs.
Subsequently, a number of the most renowned financial institutions in the world, such as KKR and Apollo, have developed a comparable desire to invest in music assets.
Mr Mercuriadis transitioned from CEO to chairman of HSM in February, when Ben Katovsky assumed the position of CEO.
On Saturday, sources underscored that Blackstone’s interest in acquiring HSF operated autonomously and was not linked to Mr. Mercuriadis.
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This position is likely to cause inquiries regarding the ongoing partnership between the buyout behemoth and the founder of Hipgnosis.
Blackstone is one of the most influential investors in the world, holding for investment hundreds of billions of dollars worth of “dry powder.”
Qasim Abbas, a senior managing director in Blackstone’s tactical opportunities team, stated at the time of the alliance with Mr. Mercuriadis’s announcement two and a half years ago: “This partnership demonstrates the enduring, sustained value we place on creative content throughout the entertainment industry as a whole.
The music industry is facilitating new methods of content consumption and has been at the forefront of the rapidly expanding streaming economy.
HSF’s market capitalization was just over £1.1 billion as of Friday’s closing price of 91.9p per share, which was marginally below the level of the Concord Chorus’ recommended offer.
Both Blackstone and HSF declined to comment on Saturday.
