Private equity firm Blackstone is currently finalizing a revised offer to purchase Hipgnosis Songs Fund (HSF), the company that owns the music catalogues of popular artists like Shakira and the Red Hot Chili Peppers. According to insiders, Blackstone plans to submit an improved bid for HSF as early as Monday, surpassing the $1.25-per-share offer recommended by HSF’s board last Thursday from rival company Concord Music.
This latest development marks a growing determination from both bidders to emerge victorious in a highly competitive bidding war for some of the most renowned assets in the global music industry. In addition to the music catalogues of Shakira and the Red Hot Chili Peppers, HSF also holds rights to songs performed by artists such as Blondie and the Kaiser Chiefs.
Last weekend, it was revealed that Blackstone had already made three offers to acquire HSF, with a fourth one following closely behind. However, they were outbid by Concord, which is backed by Apollo Global Management, just a few days later. Sources familiar with the matter have stated that Blackstone is considering a significant increase in their offer, although the exact amount is still unknown.
If Blackstone successfully acquires HSF, it will bring value to its current shareholders, who saw a significant drop in share prices in March due to a decrease in the value of its portfolio and a suspension of dividend payments. HSF’s troubles have been ongoing for several months and were brought to public attention in October when shareholders rejected the board’s goal to secure their support for the company’s continuation. The company has since been embroiled in legal disputes and disagreements over its performance and governance.
A review conducted by Shot Tower Capital, a specialist advisor, revealed in March that HSF’s assets were worth 20% less than reported by HSF’s investment adviser, Hipgnosis Song Management (HSM), in September 2020. Blackstone is already heavily involved in HSF’s future as it currently owns a 51% stake in HSM, which has a contract to manage HSF’s music assets. HSM also has a call option in its management agreement with HSF that allows it to purchase the music portfolio at the same price as Blackstone, even if Concord is successful in their bid. However, this call option would become void if the management contract is terminated for cause.
The remainder of HSM is owned by Merck Mercuriadis, a former manager of Beyonce and Sir Elton John, who founded Hipgnosis in 2018 with the goal of turning music royalties into a mainstream asset class. In 2018, Blackstone struck a $1 billion deal with Mercuriadis to provide financial support for purchasing music rights and managing catalogues. In February of this year, Mercuriadis stepped down from his role as CEO of HSM, with Ben Katovsky taking over the position.
Blackstone’s interest in acquiring HSF is a standalone decision and independent from their relationship with Mercuriadis. This may raise questions about the future of their partnership. Blackstone is being advised by investment bankers at Jefferies, while JP Morgan is among the investment banks advising Concord. As of Friday, HSF’s stock closed at 103.8p, giving it a market capitalization of just over £1.25bn. Both Blackstone and HSF declined to comment on the matter.