Hipgnosis Songs Fund Ltd on Thursday said it has agreed to a $1.40 billion cash takeover from music rights acquirer Alchemy Copyrights, which trades as Concord Chorus Ltd.
Concord will pay $1.16, or 93.2 pence, in cash per Hipgnosis Songs Fund share. The price is a 32% premium to its Wednesday close.
Shares in Hipgnosis Songs Fund jumped 31% to 92.60p in London on Thursday morning.
Hipgnosis Songs Fund, is a London-based music investment company, which has bought up the royalty rights to song catalogues of artists including the Red Hot Chili Peppers, Journey and Neil Young.
Los Angeles-based Alchemy trades as Concord, and has been acquiring music rights and companies for over ten years. Since 2015, it has deployed over $2.8 billion of capital and completed over 100 transactions in recorded music, music publishing and theatricals.
In September 2023, it bought former London listing Round Hill Music Royalty Fund Ltd for $468.8 million.
Concord said Higpnosis Songs Fund shareholders will stand to receive up to an extra $25 million in total, if the investment adviser deal with Hipgnosis Song Management is ended.
Hipgnosis Songs Fund is in dispute with its investment adviser, alleging misconduct against Hipgnosis Songs Management Ltd and its founder Merck Mercuriadis.
The dispute was sparked by an arrangement, later rejected by Hipgnosis Songs Fund shareholders, to sell part of the fund’s portfolio to a joint-venture between Hipgnosis Songs Management and private equity firm Blackstone Inc. This triggered board changes at the fund.
In March, Hipgnosis said it would divert its free cashflow toward paying down debt and wouldn’t resume paying dividends ‘for the foreseeable future’, after an independent study found a lower valuation for the company’s portfolio.
On Thursday, Hipgnosis said it believes that the share price is unlikely to increase to match the offer price in the medium term as a result of ‘numerous company-specific and certain market issues’.
‘The board considers that, in order to achieve a material improvement in the share price, the company needs to undergo, and evidence the benefits of, substantial financial and governance changes to improve its financial performance,’ it stated.
Hipgnosis revealed it had spoken to a number of potentially interested parties during the course of its strategic review and received a number of indicative and preliminary proposals, including earlier approaches by Concord.
It pointed out that all alternative proposals were less certain, and at a lower value than $1.16 secured in the offer from Concord.
Hipgnosis Songs Fund Chair Robert Naylor said: ‘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.’
Naylor added the firm will now ‘encourage’ Hipgnosis Song Management, as well as Blackstone, HSM’s majority owner, ‘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,’ Naylor stated.
Shareholders representing around 29% of Hipgnosis share capital have agreed to support the deal, including Directors and Investec Wealth & Investment Ltd.
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