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Blackstone has won the backing of Hipgnosis Songs Fund’s board as the US private equity group seeks to derail Concord Chorus’s proposed $1.4bn takeover of the UK-listed music rights investment company
Blackstone said on Saturday it had made a proposal to acquire the business for $1.24 per share in cash, which would trump Concord Chorus’s offer on Thursday of $1.16.
Hipgnosis’s board said on Sunday that, having reviewed the proposal, it would be minded to recommend the alternative deal to its shareholders should Blackstone announce a firm intention to make an offer.
It added that it would continue to provide Blackstone “access to confirmatory due diligence to enable Blackstone to announce a firm intention to make an offer as soon as possible”.
The emergence of Blackstone’s offer could trigger a bidding war for the music rights owning company, which has been through a tumultuous period in the face of questions over its valuations, debt levels and governance.
This led shareholders to decide against the continuance of the fund in a vote last year, sparking a strategic review by a new board and ultimately Thursday’s agreement to sell the fund to US rival Concord Chorus.
The Concord offer was at a premium of about a third to the Hipgnosis share price before the bid was announced, and a 4.3 per cent premium to the fund’s September net asset value.
That deal has already been backed by about 29 per cent of Hipgnosis’ issued share capital.
Hipgnosis’ music portfolio includes artists such as the Red Hot Chili Peppers and Shakira.
Blackstone was one of several parties to bid for the company as it went through a strategic review in recent months. The board said on Thursday that these offers had been “less certain, and at a lower value” than the agreed Concord Chorus offer.
A person close to Blackstone said that a firm offer could come as early as next week. They added that the private equity group was surprised at the Concord agreement, as it had been confident that it was the frontrunner and had been carrying out due diligence on its previous offer when that deal was announced on Thursday. Sky first reported that Blackstone was considering a new offer.
Blackstone already part owns Hipgnosis Song Management (HSM), the manager and investment adviser of Hipgnosis Songs Fund (HSF), although its new offer is separate to that holding.
HSF was founded by music executive Merck Mercuriadis in 2018 to turn music rights into an asset class. He was HSM’s chief executive until February, when he became its chair. If Blackstone acquires HSF the music would be managed by HSM under its new chief executive Ben Katovsky.
Blackstone said HSM has an option to purchase the entire HSF portfolio of songs, which is exercisable for six months after the termination of HSM’s contract with HSF.
This means it could try to acquire the portfolio at market value if the board continues to back the Concord offer.
But the board could consider whether there are grounds to terminate HSF’s contract with HSM, according to a person close to the situation. That would remove HSM’s option to buy HSF’s portfolio.
Doing so would risk triggering a legal dispute between the two sides.
On Saturday, Blackstone said it “remains confident in the enforceability of the [HSM] option”.
“Blackstone is seeking to find a positive outcome for all shareholders at a fair and reasonable value; however, Blackstone and HSM value the contractual protections . . . and will vigorously defend HSM’s rights pursuant to the option if required to do so,” Blackstone said.
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