Hipgnosis board opens inquiry into founder

THE board of troubled music rights firm Hipgnosis has launched an investigation into claims that its founder “cherry picked” the company’s best songs to sell to himself.

Hipgnosis last year set out plans to sell a catalogue of songs worth $440m (£347m) to a sister fund backed by Blackstone and managed by founder Merck Mercuriadis.

Shareholders blocked the deal in a bruising vote in October amid concerns about a hefty discount on the price tag.

However, analysts have since raised concerns that the catalogue has grown at a higher rate to the rest of the portfolio, sparking accusations that Mr Mercuraidis had “cherry picked” the songs. In a note published last week, analysts at Stifel said the stark outperformance of the catalogue raised “awkward questions” for Mr Mercuriadis. Investec added that there was still “material valuation uncertainty” over the portfolio.

Hipgnosis’s board, which has been overhauled in recent months, will now investigate whether the songs were chosen for their strong performance and, if so, whether this was properly disclosed to the previous directors.

Bosses said they would examine “whether the previous board were provided with the relevant information to enable them to make a decision in the best interests of shareholders”.

A spokesman for Mr Mercuriadis’s investment advisers said they completely rejected the allegations.

Hipgnosis bosses fear the founder’s call option is deterring potential suitors from making an approach and depressing the company’s value.

As a result, the board last week outlined plans to offer a £20m cash sweetener to potential bidders as it courts takeover offers.

Shareholders will vote on the proposals at an extraordinary general meeting called for Feb 7.