The music rights fund once hailed as “the future of music publishing” is set to be absorbed into a decades-old US royalties giant, and the music mogul who founded it is to be kicked out, as the Hipgnosis Songs Fund agreed a £1.1 billion sale to Concord Music Group.
Assuming no further twists, it brings an end to the saga of the Hipgnosis Fund six years after its IPO. The company stole the headlines as it bought up the rights to hits by artists like Beyonce, Shakira and Neil Young. But over the past 18 months, it became more associated with a tumbling share price, valuation errors and constant feuds between its board, shareholders and founder Merck Mercuriadis, who managed the song rights. Last year, Hipgnosis shareholders voted to wind up the fund after a controversial sale of part of the portfolio to a separate vehicle also run by the former Guns n’ Roses manager Mercuriadis.
AJ Bell investment director Russ Mould said: “An end is in sight for one of the most chaotic events to unfold in the world of investment trusts for years.”
Today’s deal likely means the end of the road for Mercuriadis’ role in managing the fund. Concord has an in-house team that manages its own portfolio, which includes 1.2 million hits from an eclectic mix of artists, from Igor Stravinsky to M.I.A., as well as Daft Punk and Pink Floyd. It has offered Hipgnosis $25 million if it can terminate its partnership with Mercuriadis’ firm, Hipgnosis Songs Management (HSM), before shareholders vote on the acquisition. That suggests Mercuriadis’ payout will be less than $25 million. Concord said the deal will likely also mean 20 of the 34 employees at the wider Hipgnosis Group will be axed.
The fund’s chairman Robert Naylor called on HSM to “agree an orderly termination” of the deal.
Concord is owned by Michigan State Retirement Systems, the pension scheme for America’s 10th-largest state. It snapped up London’s other major listed music fund, the classic rock specialist Round Hill, last year for £376 million.
The 93p per share bid is a 32.2% premium on Hipgnosis’ last closing share price, and a little higher than the fund’s last assessed net asset value. However it’s still 11% below the fund’s IPO price, and 28% below its 2021 peak.
Concord boss Bob Valentine said: “We believe we are offering a fair price for Hipgnosis’ catalogues and music assets, giving its shareholders the opportunity to realise their investment at a significant premium to the prevailing share price in cash.”
The Hipgnosis board said shareholders should vote for the offer as “company specific issues” including “governance failures” and last year’s shock dividend cancellation make it unlikely that the share price will rise to the level of the fund’s net asset value organically.
The board added that they had spoken to “a number of potentially interested parties” after the winding-up vote in October. While it received “a number of indicative and preliminary proposals”, these were all “less certain” and at a lower price than Concord’s bid. The deal already has the backing of almost a quarter of Hipgnosis shareholders.
This morning, the shares leapt to just below the offer price, at 92.6p.
The deal is set to close in the third quarter of this year.
Mould said: “Mercuriadis has his reputation to protect and is unlikely to let go without a fight, so sit back and wait for the post-credits scene to unfold.”
