Sep 15, 2023 2 min read

Hipgnosis announces $440 million deal to boost share price of Songs Fund

Plans have been confirmed to sell a stack of music rights from one Hipgnosis fund to another, part of efforts to boost the share price of the publicly listed Hipgnosis Songs Fund

Hipgnosis announces $440 million deal to boost share price of Songs Fund

Changes are afoot within the Hipgnosis empire, with a plan to sell a big old stack of music rights from one Hipgnosis fund to another. 20,000 "non-core songs" will also being sold on to a third party, so if anyone's interested in owing a load of "non-core songs", you're in luck!

The big deal that will see a number of catalogues move from the publicly listed Hipgnosis Songs Fund to Blackstone-backed Hipgnosis Songs Capital was first rumoured earlier this year as part of efforts to boost the former's share price.

In a statement to Songs Fund investors in July, Hipgnosis chief Merck Mercuriadis admitted that “the current share price does not reflect the success of our investment strategy and I know all shareholders share my frustration and disappointment that this is the case”.

He added: "We have been working with the board, following consultation with many of the company’s largest shareholders, on a number of options to enhance shareholder value”. An update was then promised in September.

And that update has now arrived. Mercuriadis confirmed yesterday that a $440 million deal had been agreed between the two Hipgnosis funds which will see the rights in songs from the likes of Rick James, Nelly, Barry Manilow, Kaiser Chiefs, Shakira and Sean Garrett shift from the Songs Fund to Songs Capital.

The profits from the sale will be used to buy back up to $180 million worth of shares in the Songs Fund and to make some payments on its credit facility, with the aim of boosting the share price.

Says Mercuriadis: “I’m delighted that through this transaction with Hipgnosis Songs Capital, not only are we able to execute the strategy of share buy backs and reducing leverage but also give clear transactional evidence … of the current realisable value of the company’s catalogues to help investors understand and have confidence in the company’s asset value".

There is one technicality to complete before the transaction between the two Hipgnosis funds can go ahead. Other parties interested in acquiring the catalogues that are part of this deal have 40 days to make a competing offer, which Hipgnosis Songs Capital can then choose to match. That's to reassure shareholders in the Songs Fund that they are getting a good price for the rights being sold.

Assuming the deal between the Songs Fund and Songs Capital goes ahead, the songs that will change ownership will still be managed and administered by Hipgnosis Song Management, the separate company that manages the catalogues of both funds.

The 20,000 "non-core songs" that will also be sold came to the Songs Fund via its acquisition of a bunch of catalogues from Kobalt back in 2020. Mercuriadis says that the Fund will retain ownership of the works in those catalogues that motivated the Kobalt deal in the first place.

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