18 April 2024
If you are covering the news that the board of the Hipgnosis Song Fund has recommended a bid from Concord, please find below a comment from Matt Ennion, fund research analyst at Quilter Cheviot:
“In a significant development for the music rights investment industry, the board of Hipgnosis has announced a recommended cash bid for the entire issued share capital of the company. The bid, valued at £0.932 per share, translates to approximately $1.4 billion and represents a 32% premium over the previous day’s closing price of 71p.
“The acquirer is Concord, a full-service music rights company. Concord has previously acquired Round Hill Music, once a peer to Hipgnosis. Apollo, a major player in the financial industry, will provide financing support for the deal in the form of debt capital.
“HSM (Hipgnosis Songs Management), the investment adviser, holds a purchase option on the portfolio. This opens the possibility of a counter bid, which would need to exceed the current offer to succeed. The outcome depends on the intentions of Blackstone, the majority owner of HSM, regarding the portfolio. The board’s chair has made an interesting statement, urging HSM and Blackstone to “agree an orderly termination of the investment management agreement.” This reference highlights the strained relationship between the two parties in recent months and the potential for further negotiations.
“The board’s recommendation has garnered support from approximately 30% of current shareholders. It is likely that the proposal will receive significant backing from the remaining shareholder base, leading to the closure of this chapter for the company.
“Our initial concern was that realising value from Hipgnosis would require a protracted process and the removal of the investment advisor. The rehabilitation of the company would have demanded substantial time, effort, and financial resources. However, today’s bid by Concord Chorus promises a swifter resolution to this saga, barring any unexpected twists. The 93p cash bid appears reasonable, offering a 4% premium above the latest Net Asset Value (NAV). Shareholders can expect a clean exit, but long-term holders may find the total return disappointing. Assuming no further complications, the deal should conclude by early autumn, bringing clarity to the future of Hipgnosis Songs Fund.”
