Music firm Hipgnosis offers £20m to prospective buyers
HIPGNOSIS has offered a £20m cash sweetener to prospective buyers in a sign the troubled music rights firm is open to takeover bids.
The newly appointed board of Hipgnosis has proposed a special resolution that would allow it to pay a fee of up to £20m to any bidder who makes an offer that could be recommended to shareholders. This would apply to suitors who make an approach for some of the fund’s song catalogues or for the company as a whole.
It comes amid concerns about founder Merck Mercuriadis’s stranglehold over Hipgnosis, which owns the rights to songs by artists including Blondie and Neil Young.
Mr Mercuaridis, a former manager of Beyoncé and Sir Elton John who serves as Hipgnosis’s investment adviser, holds a call option that allows him to purchase the company’s entire portfolio of songs.
Robert Naylor, chairman of Hipgnosis Songs Fund, warned this set-up “not only acts as a structural conflict between the interests of our shareholders and the investment adviser, but also creates a significant deterrent to potential bidders for the company’s assets, thereby depressing the value of the company”. It is understood that Mr
Mercuriadis has offered to relinquish his call option but only in return for a new contract.
The board said the £20m fee would help prospective buyers manage their due diligence and acquisition costs and ensure they were not deterred from making an approach.
It added that it had consulted investors who hold a combined 35pc of Hipgnosis shares and that all had supported the plans. One shareholder consulted about the proposal branded it a “smart and elegant measure that substantially mitigates the deterrent factor around the call option”.
The proposals, which are subject to shareholder approval at an extraordinary general meeting, mark the most significant action taken by Hipgnosis since the company lost the backing of investors at a crunch vote in October.
Hipgnosis pioneered the boom in music rights as investors rode a wave of lower interest rates to buy up song catalogues from artists. But rising rates and scrutiny over valuations have prompted a collapse in its share price.
The board must outline plans to reorganise the fund or face being wound up. Bosses said the board was not actively seeking takeover offers.
The Telegraph last month revealed that rival music rights firm Round Hill is preparing for a swoop.