After months of turmoil, the British music royalties fund Hipgnosis has agreed to be taken over by a rival music and theatrical rights company for $1.4bn.
The Concord Chorus agreement, which offers Hipgnosis’ shareholders a premium of 32% over Thursday’s $1.16 per share share price, could end the uncertainty surrounding the future of this FTSE 250 company.
After a revolt of shareholders over a planned catalog sell-off, and its business plan, the London-listed company launched a review to assess all its options. This included a possible sale.
Investors responded positively to Concord’s offer and sent shares of the once high-flying FTSE 250 company up 30% in early trading to 92p.
Concord has acquired another rival, Round Hill Royalty Fund, last year. According to the firm’s site, it administers or owns approximately 1 million copyrighted music works by artists such as M.I.A. and Leonard Bernstein.
Robert Naylor said that the acquisition represented an attractive opportunity for Hipgnosis shareholders to realise their holdings at a premium. This would mitigate the risks of achieving a material increase in the share prices.
The board believes that Concord is the best company to manage the Hipgnosis catalog in the interest of performers and composers.
The plans to delist Hipgnosis will likely cause further anxiety in the City of London and Whitehall. Leaders are worried that London is losing to rival exchanges abroad, and firms taking UK listed companies private.
Hipgnosis is a company founded by Merck Mercuriadis in 2018. He was a manager for acts such as Elton John and Guns N’ Roses, but now advises the company. It spent billions on catalogues to try to capitalize on assets it thought were undervalued during the streaming age.
Hipgnosis was able to earn royalties from the catalogue every time any of the songs were played.
In October, shareholders voted to end the investment trust. Investors also voted to remove Andrew Sutch as the chair of Hipgnosis and voted against the $440m sale the company’s catalogues.
The company was left with no choice but to rebuild the board and come up with alternative business plans or risk being closed down within six months. An April deadline is looming.
Hipgnosis suffered a new blow in March after an independent assessment reduced the value of its portfolio by 26 percent. The company also announced that it would pay off its debts with any extra cash. In December, the company was forced to sell 20,000 songs that were not specified as “core” for $23.1m to cover debt payments. This represented a 14% reduction in their value in September.
Bob Valentine, Concord’s chief executive, commented on the offer. The shareholders of Hipgnosis will need to approve the deal. “We think we are offering an attractive price for Hipgnosis catalogues and assets. This gives its shareholders the chance to realize their investment in cash at a substantial premium over the current share price.”