Music rights fund Hipgnosis agrees takeover by US rival

TROUBLED music rights firm Hipgnosis has agreed a $1.4bn (£1.1bn) takeover by a private equity-backed rival.

The board of Hipgnosis, which owns the rights to songs by artists including Neil Young and Shakira, said it had signed a deal with Us-based music group Concord.

The offer of roughly 93p per share represents a 32pc premium on Hipgnosis’s last closing price.

But it is significantly below the £1.10p per share offer made for a $465m catalogue of songs by a Blackstone-backed sister fund last year.

It also marks a major discount on the $1.95bn valuation placed on the company’s portfolio of songs by an external report last month.

The deal is subject to the backing of shareholders and an agreement with Merck Mercuriadis, Hipgnosis’s founder and investment adviser who has clashed with the company’s new board. The report found that Mr Mercuriadis, a former manager of Beyoncé and Sir Elton John, had fallen short of music industry standards when advising the London-listed fund. It also raised concerns about the adviser’s “excessive” expenses.

A spokesman for the adviser said it “strongly disagreed” with the findings and branded some aspects “factually inaccurate and misleading”.

Hipgnosis said shareholders would be entitled to share in an additional $25m if the parties enter into an agreement to terminate Mr Mercuriadis’s contract. This will exclude any money owed to him in fees and expenses.

Hipgnosis rode a boom in music royalties but rising interest rates have cast doubts over song valuations, while the fund has been rocked by concerns over governance and its financial reporting.

Nashville-based Concord, also known as Alchemy Copyrights, has spent more than $2.8bn buying up music rights since 2015.

The company, which is backed by Apollo Global Management, last year bought rival London-listed music fund Round Hill in a $468m deal.

Two former Round Hill directors have since joined Hipgnosis, including chairman Robert Naylor.

Hipgnosis lost the backing of shareholders in a crunch continuation vote in October last year. The board was given six months to set out new proposals for the company or face being wound up.

Hipgnosis and Concord said they already had the backing of shareholders with around 30pc of the company’s stock for the deal.

Mr Mercuriadis’s investment advisers declined to comment.