Blackstone increases £1.2 billion bid for Blondie music owner Hipgnosis | Business news

Private equity giant Blackstone has already submitted several offers to own songs performed by Shakira and the Red Hot Chili Peppers, Sky News has learned.

By means of Mark Kleinman, city editor @MarkKleinmanSky

Sunday April 21, 2024 03:10, UK

Private equity titan Blackstone is this weekend planning a £1.2 billion takeover bid for the owner of songs performed by Blondie, the Kaiser Chiefs and the Red Hot Chili Peppers.

Sky News can exclusively reveal that Blackstone has already submitted several offers to buy Hipgnosis Songs Fund (HSF), the London-listed music rights investment company.

The first was worth 82p per share, insiders said, while another was worth 88p and the latest was worth slightly less than a 93.2p per share bid for HSF unveiled on Thursday by music and entertainment company Concord Chorus theater rights.

Sources said Blackstone, which is advised by investment bankers at Jefferies, is now considering making a higher bid for HSF, which trades on the London Stock Exchange under the ticker SONG.

One added that Blackstone was “surprised” by the announcement this week that SONG’s board had recommended the offer from Concord Chorus – which is backed by Apollo Global Management – given its own ongoing discussions about a bid.

The person also questioned HSF’s decision to recommend a proposal “at the start of a bidding war, without trying to extract greater value for shareholders.”

A source close to HSF disputed this characterization.

A takeover of the company would deliver value to Hipgnosis shareholders, who saw its shares fall to a record low of around 56p in March due to a portfolio write-down and a suspension of dividend payments.

HSF’s problems have been playing out in the public arena for months, culminating last October with a decision by shareholders to reject the board’s goal of securing their support for its continuation.

Shakira. Photo: Amy Harris/Invision/AP

The company has been embroiled in bitter accusations and legal arguments over its performance and governance.

A study conducted by Shot Tower Capital, a specialist adviser, concluded in March that SONG’s assets were worth a fifth less than Hipgnosis Song Management (HSM), its investment adviser, had reported last September.

Blackstone is already deeply immersed in HSF’s future as it owns a 51% stake in HSM, which has a contract to manage the SONG assets.

If HSM agreed to terminate the contract between them, it would free up up to $25 million for HSF, although analysts say it is unclear why HSM would willingly forego cash it believes is owed to it.

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One of the obstacles Blackstone faces in any new offer lies in the fact that the SONG board has received irrevocable acceptances of the Concord Chorus offer from more than 23% of shareholders.

These only disappear if a rival bidder makes an offer that is worth at least 10% more – in this case more than 102 cents per share.

However, HSM also has a call option in its management agreement with HSF, which allows the company to acquire the portfolio of music assets even if Concord Chorus is successful, at the same price it pays.

It is assumed that the call option will evaporate if the management contract is terminated for cause.

The legal disputes involving the companies, whose insiders have balanced the situation, with a possible compromise deal between them also raised by investors.

A source close to Blackstone said it had high confidence in its contractual position.

Artists whose catalogs are owned by the publicly traded company also include Neil Young and Mark Ronson.

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The rest of HSM is owned by Merck Mercuriadis, a former manager of Beyonce and Sir Elton John, who launched Hipgnosis in 2018 with the aim of turning music rights into a mainstream asset class.

Three years later, he closed a $1 billion deal for Blackstone to provide firepower for buying music rights and managing catalogs.

Since then, some of the world’s leading financiers, including Apollo and KKR, have developed a similar willingness to buy music assets.

In February, Mr Mercuriadis moved from CEO of HSM to the role of Chairman, with Ben Katovsky taking over as CEO.

Sources emphasized on Saturday that Blackstone’s stake in the HSF takeover was separate and independent of Mr Mercuriadis.

That stance will likely raise questions about the buyout giant’s ongoing relationship with Hipgnosis’ founder.

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Blackstone is one of the most powerful investors in the world, with hundreds of billions of dollars of “dry powder” available for investment.

When the alliance with Mr Mercuriadis was unveiled two and a half years ago, Qasim Abbas, senior managing director in Blackstone’s tactical opportunities team, said: “This partnership underlines the long-term, sustainable value we see in creative content around the world. the wider entertainment industry.

“The music industry is at the forefront of the rapidly growing streaming economy, unlocking new ways to consume content.”

Shares in HSF closed at 91.9p on Friday, giving it a market capitalization of just over £1.1bn and marginally below the level of Concord Chorus’ recommended offer.

On Saturday, Blackstone and HSF both declined to comment.