Private equity giant Blackstone bid $1.5 billion to buy Hipgnosis Songs Fund on Saturday (April 20), marking a significant escalation in the fight for control of the troubled music royalty fund and its collection of rights to songs by Neil Young, Journey, Lindsey Buckingham, Blondie and others.
Blackstone is offering $1.24 per share in an all-cash offer that represents an 8.7% premium over the previous day’s closing share price, and is significantly higher than the $1.4 billion takeover bid that Nashville-based Concord Chorus made for the fund earlier this week.
Blackstone already owns two other entities under the Hipgnosis name — the private music assets investment fund Hipgnosis Songs Capital and the investment advisor Hipgnosis Song Management — and its bid on Saturday showed the private equity behemoth is willing to flex its muscle to maintain assets under the Hipgnosis umbrella.
The five-year-old, London-listed Hipgnosis Songs Fund has cut its net asset value and shareholder dividends in recent months, as it struggled to address accounting errors and infighting between its board and investment manager that have angered investors already frustrated by an underwhelming stock price.
On Thursday (April 18), the board of directors announced in a filing with the London Stock Exchange that it had agreed to recomment a $1.402 billion proposed takeover bid from Concord to shareholders, which values each Hipgnosis share at £0.93 ($1.14). While the board said that institutional investors representing 30% of the fund’s outstanding shares were on board to vote in favor of the deal with Concord, it still needs shareholder approval from investors holding a total of 75% of shares.
Blackstone’s Hipgnosis Song Management, the investment adviser to the public fund and the private fund (Hipgnosis Songs Capital), has the right to outbid Concord and any other rival bidders to take the fund’s assets private, according to an option in its contract laid out when the fund went public in 2018.
The option was created with the sensitivities unique to music rights in mind. Hipgnosis Songs Fund was founded and built by Merck Mercuriadis, a longtime music executive and manager for artists like Elton John, Beyoncé and Guns N’ Roses. Mercuriadis used his relationships in the music industry to build the fund’s portfolio of rights to hit songs, and this option in the investment advisory contract was designed to give artists confidence that their catalogs would never trade hands — something that famously angered Taylor Swift.
However, since Hipgnosis Songs Fund investors served the board of directors the equivalent of a no-confidence vote last fall, this option has presented hurdles for the board in its effort to secure outside bids for the portfolio.
In its offer, which references Concord’s bid as $1.16 per share due to fluctuations in exchange rates, Blackstone said it “strongly encourages the board of Hipgnosis to recognise the significant increase in value available to all shareholders under the terms of its Fourth Proposal, over the $1.16 as set out in the Concord Offer, and to work with Blackstone to reach agreement on a unanimously recommended Firm Offer in an expeditious manner.”