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Hipgnosis Songs Fund, the British company that helped kick-start the music industry\u2019s rush for catalog deals \u2014 acquiring tens of thousands of songs by Justin Bieber, Neil Young, Shakira and others \u2014 but has seen its share price plummet, has reached a tentative deal to sell itself to Concord, a major independent music company, for $1.4 billion.<\/p>\n
Hipgnosis, which trades on the London Stock Exchange, said on Thursday that its board had given unanimous approval. But the deal still faces what could be a significant hurdle in the form of a contractual option held by an affiliated company to buy the catalog at a set price.<\/p>\n
Robert Naylor, the chairman of Hipgnosis, said in a statement: \u201cThe acquisition represents an attractive opportunity for our shareholders to immediately realize their holding at a premium, mitigating the risks we see ahead to achieving a material improvement in the share price.\u201d<\/p>\n
Bob Valentine, the chief executive of Concord, which has a portfolio of labels like Stax and Craft, and large holdings in music publishing, added: \u201cWe believe we can integrate Hipgnosis\u2019 catalogs into our wider portfolio of 1.2 million songs in a way that will deliver benefits for composers, performers and all our stakeholders.\u201d<\/p>\n<\/div>\n<\/div>\n
Concord\u2019s cash offer, of $1.16 per share, represents a 32 percent premium over Hipgnosis\u2019s last closing share price, though it is still down almost 28 percent from the stock\u2019s peak in November 2021.<\/p>\n
The Concord acquisition, if it goes through, would end one of the most tumultuous stories in the recent history of the music business. Hipgnosis, founded by Merck Mercuriadis<\/a>, a longtime music executive who once managed superstar acts like Beyonc\u00e9, Guns N\u2019 Roses and Elton John, went public in 2018, with a splashy pitch to investors \u2014 and artists \u2014 that the royalties from the copyrights of popular songs could be \u201cmore valuable than gold or oil.<\/a>\u201d<\/p>\n The company spent about $2.2 billion<\/a> on catalog acquisitions, with top artists like Bieber receiving up to $200 million for rights to their songs. As recently as last September, the value of the Hipgnosis catalog was estimated at $2.6 billion by an independent financial firm.<\/p>\n In the process, Mercuriadis became something of a celebrity on the business side of music. Always appearing in a black Prada jacket, he presented himself as a sympathetic advocate for artists and a vociferous critic of the major music conglomerates. Mercuriadis also spoke of using Hipgnosis\u2019s leverage in the marketplace to push for better financial deals for songwriters overall.<\/p>\n \u201cPeople look at songs as being inanimate objects; I don\u2019t,\u201d he told The New York Times in an interview<\/a> in 2020. \u201cI think that they\u2019re the great energy that makes the world go \u2019round, and I think that they deserve to be managed with the same level of responsibility that human beings do.\u201d<\/p>\n<\/div>\n<\/div>\n In the company\u2019s complicated structure, Hipgnosis Songs Fund, the listed entity, is an \u201cinvestment trust\u201d that owns the song rights, while a separate company, Hipgnosis Song Management \u2014 owned by Mercuriadis and the giant investment firm Blackstone<\/a> \u2014 is its \u201cinvestment adviser,\u201d doing much of the work of acquiring those assets.<\/p>\n Over the last couple of years, as interest rates rose, the company\u2019s share price plunged. In October, after the company suspended its dividend, shareholders voted against<\/a> maintaining the company\u2019s structure as an investment trust, which set in motion a strategic review and an evaluation of its assets by a new financial adviser.<\/p>\n That evaluation, announced in March, reduced the value of Hipgnosis\u2019s assets by 26 percent, to just under $2 billion, and offered a harsh review<\/a> of its business practices. Hipgnosis Song Management, according to the review, had overpaid for the majority of its catalog and overstated the fund\u2019s revenue and earnings; and Hipgnosis Songs Fund had overstated the ownership stakes that it had in many songs.<\/p>\n In announcing its agreement with Concord, Hipgnosis said it would \u201cencourage\u201d the investment adviser to terminate its so-called call option, which gives it the right to match any third-party offer. Hipgnosis Song Management did not immediately respond to request for comment.<\/p>\n<\/div>\n<\/div>\n