Mercuriadis in threat over Hipgnosis songs

HIPGNOSIS founder Merck Mercuriadis has threatened to take control of the music rights company’s back catalogue as he urges the board to accept a takeover bid from Blackstone.

Mr Mercuriadis, whose company Hipgnosis Song Management (HSM) provides investment advice to Hipgnosis, signalled it would trigger a call option to take control of the fund’s songs should he lose the mandate.

London-listed Hipgnosis owns the rights to songs by artists including Shakira and Neil Young.

The company has become the target of a bidding war, with US rival Concord Chorus and Blackstone both squaring off to buy the business.

The board of Hipgnosis had agreed to Concord’s $1.16 (94p) per share offer before Blackstone swooped in with a proposed £1.2bn takeover bid. BMG, the German music giant that manages the rights for artists including Kylie Minogue, has also expressed an interest in Hipgnosis, Sky News reported.

Hipgnosis’s board has said it would be minded to accept Blackstone’s $1.24 approach if the private equity company confirmed a firm bid.

Mr Mercuriadis’s intervention will raise pressure to accept the higher bid.

His threat to take control of the back catalogue comes as Concord’s recommended bid includes a $25m bonus if the parties reach an agreement to terminate HSM’S contract, minus any fees or expenses still outstanding.

By contrast, Blackstone is expected to retain Mr Mercuriadis’s company as investment adviser should its bid be accepted. HSM, which is chaired by Mr Mercuriadis, is backed by Blackstone. HSM said yesterday it would “vigorously protect its interests” if its contract were cut short, including by triggering the call option.

Under the terms of its agreement with Hipgnosis, HSM holds an option that allows it to purchase the fund’s portfolio of songs should its contract be terminated.

Blackstone has said its bid for Hipgnosis is independent of Mr Mercuriadis, who does not stand to gain financially from the deal. If its offer is accepted, the fund would be run by Ben Katovsky, who was appointed chief executive of HSM in February.

A spokesman for HSM said: “HSM has repeatedly been blamed for many issues affecting the Company which were not HSM’S responsibility.”

Hipgnosis declined to comment.