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Blackstone has agreed to acquire Hipgnosis Songs Fund for almost $1.6bn, the latest salvo in a bidding war for the troubled group that pioneered efforts to turn music rights into a mainstream asset class.
The board of Hipgnosis said on Monday that it was backing a cash offer from Blackstone of $1.30 per share, up from the buyout group’s initial proposal of $1.24 a share made last week.
Blackstone has been battling for Hipgnosis with Apollo-backed US investment group Concord. Concord’s latest offer valued Hipgnosis at $1.5bn and had won the support of the board of Hipgnosis, which owns a large portfolio of music including the Kaiser Chiefs, Red Hot Chili Peppers and Shakira.
The Hipgnosis board has withdrawn its recommendation for the Concord revised offer. Announcing the deal, Qasim Abbas, a senior managing director at Blackstone, said: “The breadth of the Blackstone platform, combined with our operational expertise, will support and enhance the value of the acquired rights.”
Founded by Merck Mercuriadis in 2018, Hipgnosis was at the forefront of attempts to transform music rights into a mainstream asset class as investors sought out higher returns during the era of low interest rates.
Hipgnosis has built a portfolio of 138 catalogues with more than 40,000 songs across genres, artists, vintages and right types.
However, the appeal of music rights has been hampered by higher interest rates, which pushed up the “discount rate” that is used to calculate asset values into the future, cutting song right valuations.
The bidding war is a welcome boost for shareholders given the months of speculation over the future of the company, whose share price had plummeted on repeated cuts to the value of its portfolio and questions over its debt levels and governance.
However, the value of its music rights has been in question over the past year, with further criticism by shareholders and analysts over its governance and management structure.
Blackstone will hope its revised, higher offer will land a knockout blow in the bidding war for the music rights business.
Blackstone, which has made repeated, but lower, proposals to the company, is determined to acquire the music rights of the group, according to people close to the talks.
Blackstone already has deep ties to Hipgnosis. The New York-based group bought a majority stake in Mercuriadis’s management company in 2021 — Hipgnosis Songs Management — which collects fees for overseeing the listed Hipgnosis fund.
Blackstone also set up a separate $1bn fund called Hipgnosis Songs Assets to acquire music rights catalogues. That fund is also managed by Hipgnosis Song Management.
However, Concord will now need to decide whether to again raise its offer for a third time. The board of Hipgnosis Songs Fund said it recommended that shareholders support the Blackstone offer, which is priced at 4 per cent above the most recent Concord bid or 48.1 per cent above the closing price before the takeover battle started earlier this month.
Robert Naylor, chair of Hipgnosis, said: “Since we started our strategic review, we have been clearly focused on looking at all the options to deliver shareholder value.”
