Apr 29, 2024 2 min read

Blackstone upstages Concord with $1.30 Hipgnosis Songs Fund bid

Another day and another revised bid for SONG. Blackstone has upped its offer, SONG’s board recommends the offer, so we can all rest tight. Until tomorrow. When will this all end? Are we really going to have to ensure another month of this?

Blackstone upstages Concord with $1.30 Hipgnosis Songs Fund bid

As expected Blackstone has trumped Concord’s $1.25 per-share offer to gobble up the Hipgnosis Songs Fund - or SONG - in an announcement circulated at 7am this morning.

The offer, which is once again endorsed by SONG’s board, comes in at around 104p and is nearly double the stock’s lowest-ebb share price of 52.9p from early March. However, a key term of the offer is that Hipgnosis shareholders who want “to receive the cash consideration in Sterling” will have to elect to be paid in GBP rather than USD. It cautions that this payment will include a “deduction of any transaction or dealing costs associated with the conversion”, with the conversion being carried out “at the applicable market exchange rate on the latest practicable date for fixing such rate prior to the relevant payment date”. 

While Sterling and the US Dollar are generally relatively stable - and forward currency rates are pretty much in line with today’s rate - unexpected currency fluctuations could mean that shareholders end up with more or less if they opt to receive funds in GBP.

According to Blackstone’s statement the transaction is “currently expected to complete during the third quarter of 2024”. It further states that “the quality and strength of the music rights catalogues Hipgnosis has acquired and developed are complementary to Blackstone’s current holdings of comparable assets”, and that this “provides an exciting path forward” which will allow it to apply its “expertise in this space to further develop the potential of Hipgnosis’ portfolio”.

Part of that “further development” of the Hipgnosis portfolio may include integrating all the various Hipgnosis entities to “rationalise the corporate structure” of what would then potentially be an integrated Hipgnosis Group. That would include SONG itself, alongside Hipgnosis Song Management - the Blackstone-owned investment adviser to SONG - as well as Hipgnosis Songs Capital and Hipgnosis Songs Group

As part of this, they flag that - although they don’t necessarily anticipate it - there may be a resulting reduction in headcount at Hipgnosis Songs Group LLC, which currently employs 34 people and is “the only entity within the Hipgnosis Group that has employees”. 

The announcement makes a specific point of highlighting the “great importance” that Blackstone places on the “skill and experience of HSM’s management and employees and recognises the contributions they have made to the development of the Hipgnosis portfolio and the business”, before going on to say that they anticipate that “HSM will continue to be involved in managing the assets owned by Hipgnosis”. 

However, the asset management relationship between SONG - post-acquisition - and HSM will be “reconfigured”. As things currently stand, Blackstone intends to keep the current Hipgnosis Group offices in Tennessee, California, New York and London.

Following the announcement, SONG saw relatively high trading volumes over the course of the day, with 84.6 million shares changing hands - but with the price remaining relatively stable at 104.6p, a fraction above today’s USD/GBP spot rate. This suggests that the market may still see potential for higher offers, with sellers finding buyers at a price that is above the Sterling rate they would receive if Blackstone’s offer is accepted.

The obvious next step is yet another increased offer from Concord - and then potentially another counter from Blackstone. For both companies the deal is a fairly compelling prospect: for Concord, already the owner of Round Hill’s catalogue, it would consolidate its position in the music rights market. For Blackstone the motivation is double: more music rights, but also its acquisition avoids any prolonged, messy legal battle relating to HSM’s call option.

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