Private equity titan Blackstone is this weekend drawing up plans for a £1.2 billion takeover bid for the owner of songs performed by Blondie, Kaiser Chiefs and Red Hot Chili Peppers.
Sky News can exclusively reveal that Blackstone has already submitted several offers to buy Hipgnosis Songs Fund (HSF), the London-listed music rights investment company.
The first was worth 82p per share, sources said, while another was launched at 88p and the latest was worth slightly less than a 93.2pa per share offer for HSF released on Thursday by Concord Chorus, a music rights company and theatrical.
Sources said Blackstone, which is being advised by investment bankers from Jefferies, was now considering making a higher bid for HSF, which trades on the London Stock Exchange under the ticker symbol SONG.
One added that Blackstone was “surprised” by the announcement this week that SONG’s board had recommended the bid from Concord Chorus – which is backed by Apollo Global Management – given its own ongoing talks about a bid.
The person also questioned HSF’s decision to recommend a proposal “at the start of a bidding war, without trying to extract greater value for shareholders.”
A source close to HSF disputed this characterization.
A takeover of the company would crystallize value for Hipgnosis shareholders, who saw the shares fall to an all-time low in March of around 56p, following a reduction in the value of their portfolio and a suspension of dividend payments.
HSF’s problems have been playing out for months in the public arena, culminating last October with the shareholders’ decision to reject its board’s aim of securing their support for its continuation.
The company has been mired in bitter recriminations and legal arguments over its performance and governance.
An analysis conducted by Shot Tower Capital, a specialist consultant, concluded in March that SONG’s assets were worth a fifth less than Hipgnosis Song Management (HSM), its investment adviser, had reported last September.
Blackstone is already deeply immersed in HSF’s future because it owns a 51% stake in HSM, which has a contract to manage SONG’s assets.
If HSM agreed to terminate the contract between them, it would free up up to $25 million to HSF, although analysts say it is unclear why HSM would voluntarily relinquish any money it believes is owed to it.
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One of the obstacles facing Blackstone in any new offer lies in the fact that the SONG board received irrevocable acceptances of the Concord Chorus offer from more than 23% of shareholders.
They only disappear if a rival bidder submits an offer worth at least 10% more – in this case, above 102 cents per share.
However, HSM also has a call option in its management agreement with HSF that allows it to acquire the portfolio of musical assets even if Concord Chorus is successful, for the same price it pays.
It is understood that the purchase option disappears if the management contract is terminated for just cause.
The legal disputes involving the companies, whose insiders left the situation well balanced, with a possible compromise agreement between them also being considered by investors.
A source close to Blackstone said it was very confident in its contractual position.
Artists whose catalogs belong to the listed company also include Neil Young and Mark Ronson.
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The remainder of HSM is owned by Merck Mercuriadis, the former manager of Beyoncé and Sir Elton John, who launched Hipgnosis in 2018 with the aim of transforming music royalties into a mainstream asset class.
Three years later, he struck a $1 billion deal with Blackstone to provide firepower for purchasing music rights and managing catalogs.
Since then, some of the world’s most prominent financiers, including the likes of Apollo and KKR, have developed a similar appetite for buying music assets.
In February, Mercuriadis moved from the role of CEO of HSM to the role of president, with Ben Katovsky taking over as CEO.
Sources emphasized on Saturday that Blackstone’s interest in acquiring HSF was independent and separate from Mr. Mercuriadis.
This stance will likely raise questions about the acquisition giant’s ongoing relationship with Hipgnosis’ founder.
Blackstone is one of the most powerful investors in the world, with hundreds of billions of dollars in “dry powder” available for investment.
When its alliance with Mercuriadis was revealed two and a half years ago, Qasim Abbas, senior managing director of Blackstone’s tactical opportunities team, said: “This partnership underscores the sustainable, long-term value we see in creative content across the world”. the entertainment industry in general.
“The music industry has been at the forefront of the rapidly growing streaming economy and is unlocking new ways to consume content.”
HSF shares closed on Friday at 91.9p, giving it a market capitalization of just over £1.1 billion and marginally below the level of Concord Chorus’ recommended offer.
On Saturday, Blackstone and HSF declined to comment.
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