Concord, financed by Apollo, makes $1.4bn cash bid to acquire Hipgnosis Songs Fund’s assets

Remember when Harmony buy Round Hill MusicIts assets exited the UK stock exchange at a price 469 million USD in November?

The US company is now looking to make a similar acquisition, this time for the song catalog of another UK listed entity – Hipgnosis Song Foundation.

The HSF Board of Directors this morning (April 18) informed shareholders that Concord has made a cash offer equivalent to 1.40 billion USD to get his property.

Technically, Concord's offer was made by Concord Choir Ltd (CCL)an entity controlled by Copyright Alchemy LLC.

Investment giant Apollo Global Management is funding Concord's bid through debt capital, as well as taking a minority stake in CCL.

of HSF The board of directors accepted Concord's offer, which offered them a higher price 32.2% to the Hipgnosis Songs Fund's closing share price yesterday (April 17) and is recommending its shareholders do the same.

Capital Shooting Towerin a review of the company, set an average valuation in HSF's portfolio last month 1.93 billion USD.

of Concord 1.4 billion USD the bid was apparently about half a billion dollars lower than that figure. It's also roughly half the valuation for the Hipgnosis Songs Fund portfolio (2.6 billion USD) by Citrin Cooperman last September.

Interestingly, the current President of the Hipgnosis Song Foundation, Rob Naylorserved as president of Round hill The fund listed in the UK when that company made the deal to sell to Concord.

Naylor and his board at HSF are looking to rubber-stamp it Harmony the agreement passed the HSF General Assembly and Court Meeting on June 10. HSF expects to complete the sale to Concord in Q3 of this year.

Of course, the biggest question is: What happens to Merck Mercuriadis and backed by his Blackstone Hipgnosis Song Manager (HSM)Who continues to be HSF's investment advisor?

The HSF Board, in today's announcement, essentially asked that HSM Leave without fuss.

It tells HSF shareholders with whom they will further share 25 million USD – minus the fees paid to HSM – should HSM agreed to a timely termination agreement for Concord's proposed takeover of HSF.

Will HSM quietly accept this termination agreement? Don't bet on it.

HSM continue to hold the 'call option', set out in the HSF Administrative documents of 2018. This 'call option' states that, should HSM ever been fired like of HSF investment advisor, a provision will be triggered allowing HSM to purchase HSF for a pre-set amount.

The bet amount will be higher than:

• (I) Hipgnosis Song Fund public market cap;
• (ii) The 'fair value' of the Hipgnosis Songs Fund is assessed by an independent valuer; or
• (iii) The price that a separate and trusted third party is willing to pay to acquire the HSF (i.e., the relevant rights).

Therefore. If Blackstone/HSM used to be ready to compete with Concord 1.4 billion USD bid for HSF, then under the original terms of the 'call option', HSM could consider it.

However, this raises two larger questions: (One) Will Blackstone pay HSM upfront to match the bid?; (b) Will HSM's 'call option' withstand any legal challenge from HSF board, especially if the HSF board tries to fire HSM from his position as investment advisor for 'cause'?

The second of these The question becomes important when you consider one damning report on some of HSM accounting practice at HSF, published by Capital Shooting Tower last month.

In response to that publication, HSM says that there are “aspects of [Shot Tower’s report] which HSM completely disagrees with and considers misleading.

Whichever way you look at it, it seems unlikely – if Blackstone To be willing to fund the process – that Merck Mercuriadis And HSM allowing HSF's portfolio to be sold to Concord without any complications.

'There is no need for debate' is the exact result that HSF President, Rob Naylorhowever looking.

“We now encourage Hipgnosis Song Management, the Company's Investment Advisor, and Blackstone, the majority owner of HSM, through the funds they manage and/or advise, to jointly intend to terminate the Investment Advisory Agreement in an orderly manner.

“This will enable the payment of the larger amount under the transaction agreed with Concord and end a period of uncertainty for all Hipgnosis stakeholders.”

of HSF Today's announcement said the company's board had recently spoken to “a number of potentially interested parties” about the potential sale of the HSF portfolio and had received “a number of preliminary proposals and preliminary” includes several proposals from Concord.

Commenting on Concord's bid today, Robert Naylor, “The Board is pleased to announce and unanimously recommend the $1.4 billion Proposal for Hipgnosis from Concord,” said the Chairman of Hipgnosis. The acquisition presents an attractive opportunity for our shareholders to immediately realize their shares at a higher price, mitigating the risks we see ahead in achieving improvement significantly on the stock price.

“At the same time, the Board believes that Concord, one of the world's leading independent music companies, is the rightful owner to take over the Hipgnosis catalog and manage it for the benefit of its composers and listeners. perform.”

Bob Valentine, CEO of Concord said: “We are pleased to announce this Offer for Hipgnosis, which was unanimously recommended by the Board and received 29.38% support. of their shareholders. We believe we are offering a fair price for Hipgnosis' music catalogs and assets, providing shareholders with the opportunity to realize their investment at a significant premium over Current stock price in cash.

“Concord is the world's leading independent music company, with extensive experience in developing, producing and marketing recordings and songs around the world to maximize their value. We believe we can integrate Hipgnosis' catalog into our broader catalog of 1.2 million songs in a way that benefits songwriters, performers and all of our stakeholders. we.”Music business worldwide