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Hipgnosis Songs Fund, the British firm that helped kick-start the music business’s rush for catalog offers — buying tens of hundreds of songs by Justin Bieber, Neil Young, Shakira and others — however that has seen its share worth plummet has reached a tentative deal to promote itself to Concord, a serious impartial music firm, for $1.4 billion.
Hipgnosis, which trades on the London Stock Exchange, mentioned on Thursday that its board had given unanimous approval. But the deal nonetheless faces what may very well be a major hurdle within the type of a contractual choice held by an affiliated firm to purchase the catalog at a set worth.
Robert Naylor, the chairman of Hipgnosis, mentioned in an announcement: “The acquisition represents a sexy alternative for our shareholders to instantly notice their holding at a premium, mitigating the dangers we see forward to reaching a fabric enchancment within the share worth.”
Bob Valentine, the chief govt of Concord, which has a portfolio of labels like Stax and Craft, and huge holdings in music publishing, added: “We consider we will combine Hipgnosis’ catalogs into our wider portfolio of 1.2 million songs in a method that may ship advantages for composers, performers and all our stakeholders.”
Concord’s money supply, of $1.16 per share, represents a 32 p.c premium over Hipgnosis’ final closing share worth, although it’s nonetheless down nearly 28 p.c from the inventory’s peak in November 2021.
The Concord acquisition, if it goes by way of, would finish one of the tumultuous tales within the latest historical past of the music enterprise. Hipgnosis, based by Merck Mercuriadis, a longtime music govt who as soon as managed famous person acts like Beyoncé, Guns N’ Roses and Elton John, went public in 2018, with a splashy pitch to buyers — and artists — that the royalties from the copyrights of standard songs may very well be “extra invaluable than gold or oil.”
The firm spent about $2.2 billion on catalog acquisitions, with high artists like Bieber receiving as much as $200 million for rights to their songs. As lately as September, the worth of the Hipgnosis catalog was estimated at $2.6 billion by an impartial monetary agency.
In the method, Mercuriadis grew to become one thing of a celeb on the enterprise facet of music. Always showing in a black Prada jacket, he introduced himself as a sympathetic advocate for artists and a vociferous critic of the key music conglomerates. Mercuriadis additionally spoke of utilizing Hipgnosis’ leverage within the market to push for higher monetary offers for songwriters general.
“People take a look at songs as being inanimate objects; I don’t,” he instructed The New York Times in an interview in 2020. “I feel that they’re the nice power that makes the world go ’spherical, and I feel that they should be managed with the identical stage of duty that human beings do.”
In the corporate’s difficult construction, Hipgnosis Songs Fund, the listed entity, is an “funding belief” that owns the tune rights, whereas a separate firm, Hipgnosis Song Management — owned by Mercuriadis and the enormous funding agency Blackstone — is its “funding adviser,” doing a lot of the work of buying these property.
Over the final couple of years, as rates of interest rose, the corporate’s share worth plunged. In October, after the corporate suspended its dividend, shareholders voted in opposition to sustaining the corporate’s construction as an funding belief, which set in movement a strategic overview and an analysis of its property by a brand new monetary adviser.
That analysis, introduced in March, lowered the worth of Hipgnosis’ property by 26 p.c, to simply beneath $2 billion, and supplied a harsh overview of its enterprise practices. Hipgnosis Song Management, in keeping with the overview, had overpaid for almost all of its catalog and overstated the fund’s income and earnings; and Hipgnosis Songs Fund had overstated the possession stakes that it had in lots of songs.
In saying its settlement with Concord, Hipgnosis mentioned it might “encourage” the funding adviser to terminate its so-called name choice, which supplies it the best to match any third-party supply. Hipgnosis Song Management didn’t instantly reply to request for remark.
