Hipgnosis Songs Fund, the British firm that helped kick-start the music trade’s rush for catalog offers — buying tens of 1000’s of songs by Justin Bieber, Neil Younger, Shakira and others — however has seen its share value plummet, has reached a tentative deal to promote itself to Harmony, a significant impartial music firm, for $1.4 billion.
Hipgnosis, which trades on the London Inventory Change, mentioned on Thursday that its board had given unanimous approval. However the deal nonetheless faces what might be a big hurdle within the type of a contractual possibility held by an affiliated firm to purchase the catalog at a set value.
Robert Naylor, the chairman of Hipgnosis, mentioned in an announcement: “The acquisition represents a sexy alternative for our shareholders to instantly understand their holding at a premium, mitigating the dangers we see forward to reaching a fabric enchancment within the share value.”
Bob Valentine, the chief govt of Harmony, which has a portfolio of labels like Stax and Craft, and huge holdings in music publishing, added: “We consider we are able to combine Hipgnosis’ catalogs into our wider portfolio of 1.2 million songs in a approach that may ship advantages for composers, performers and all our stakeholders.”
Harmony’s money supply, of $1.16 per share, represents a 32 % premium over Hipgnosis’s final closing share value, although it’s nonetheless down virtually 28 % from the inventory’s peak in November 2021.
The Harmony acquisition, if it goes via, would finish some of the tumultuous tales within the current historical past of the music enterprise. Hipgnosis, based by Merck Mercuriadis, a longtime music govt who as soon as managed famous person acts like Beyoncé, Weapons N’ Roses and Elton John, went public in 2018, with a splashy pitch to traders — and artists — that the royalties from the copyrights of fashionable songs might be “extra useful than gold or oil.”
The corporate spent about $2.2 billion on catalog acquisitions, with prime artists like Bieber receiving as much as $200 million for rights to their songs. As just lately as final September, the worth of the Hipgnosis catalog was estimated at $2.6 billion by an impartial monetary agency.
Within the course of, Mercuriadis grew to become one thing of a celeb on the enterprise aspect of music. At all times showing in a black Prada jacket, he introduced himself as a sympathetic advocate for artists and a vociferous critic of the key music conglomerates. Mercuriadis additionally spoke of utilizing Hipgnosis’s leverage within the market to push for higher monetary offers for songwriters total.
“Individuals take a look at songs as being inanimate objects; I don’t,” he instructed The New York Instances in an interview in 2020. “I believe that they’re the nice power that makes the world go ’spherical, and I believe that they should be managed with the identical degree of duty that human beings do.”
Within the firm’s sophisticated construction, Hipgnosis Songs Fund, the listed entity, is an “funding belief” that owns the tune rights, whereas a separate firm, Hipgnosis Tune Administration — owned by Mercuriadis and the enormous funding agency Blackstone — is its “funding adviser,” doing a lot of the work of buying these belongings.
Over the past couple of years, as rates of interest rose, the corporate’s share value plunged. in October, after the corporate suspended its dividend, shareholders voted towards sustaining the corporate’s construction as an funding belief, which set in movement a strategic evaluation and an analysis of its belongings by a brand new monetary adviser.
That analysis, introduced in March, lowered the worth of Hipgnosis’s belongings by 26 %, to only underneath $2 billion, and supplied a harsh evaluation of its enterprise practices. Hipgnosis Tune Administration, in line with the evaluation, had overpaid for almost all of its catalog and overstated the fund’s income and earnings; and Hipgnosis Songs Fund had overstated the possession stakes that it had in lots of songs.
In saying its settlement with Harmony, Hipgnosis mentioned it might “encourage” the funding adviser to terminate its so-called name possibility, which supplies it the appropriate to match any third-party supply. Hipgnosis Tune Administration didn’t instantly reply to request for remark.
