Merck Mercuriadis, founder and chair of Hipgnosis Song Management, has announced that he will be stepping down from his role and departing HSM.
In a statement issued today, HSM revealed Mercuriadis’s planned departure, and said that this will coincide with the “closing of the proposed acquisition” of Hipgnosis Songs Fund, or SONG, by Blackstone’s Lyra BidCo. While the deal is expected to be voted on at a shareholder meeting convened for 8 Jul, the transaction - should it proceed - will not formally close until the end of July, meaning Mercuriadis’s exit should be finalised on the same timeline.
Mercuriadis, who founded HSM and SONG six years ago, says that the Blackstone acquisition provides “a timely opportunity to undertake a strategic shift of focus”.
What that shift of focus might be is unclear, but Mercuriadis drops a couple of hints, saying that he wants to “spend more time advocating on behalf of songwriters to ensure that they are properly compensated for their work”, and that with the next US Copyright Royalty Board ruling four years away “the time to act is now”.
“I have always envisioned bringing songwriters together globally and organised”, he says, “to ensure they have a voice at the table, representing the consensus view of their community, in discussions about their compensation”.
What might that role look like? Will Mercuriadis be making another announcement in coming weeks? A spokesperson told CMU, “Merck hasn’t asked me to share any specific details at this time. But as you know, he’s always been particularly passionate about this topic”.
The timing of Mercuriadis’s announcement, linked to the expected closing of the Blackstone deal in a few days time, suggests a carefully orchestrated transition.
However, as CMU reported recently, there is mounting uncertainty about Blackstone’s deal, as a number of hedge funds have increased their stakes in SONG, even though Blackstone made it clear in a recent regulatory filing that it will not be further increasing its offer. Despite that filing, a number of hedge funds have continued to increase their positions in SONG, buying up millions of shares within fractions of a penny of Blackstone’s $1.31 offer price, leading to speculation that the deal may be in jeopardy.
That said, an increasing number of hedge funds specialise in looking for what are termed ‘M&A Arb’ opportunities. This involves placing trades where investors have identified opportunities to make a profit from the ‘spread’ between a share’s current trading price and the offer price in a takeover. These deals are often highly leveraged - meaning that a hedge fund does not necessarily need to invest the full price of the shares it acquires.
With the future of SONG to be decided in a matter of days, it may be that the hundreds of millions of dollars of capital tied up in SONG are simply hedge funds exploiting arbitrage opportunities, and that as that key date approaches those traders are increasingly confident that the deal will go through at the offer price of $1.31, allowing them to quickly cash out their positions for a small profit, magnified by the leveraged nature of their trades.
With Mercuriadis announcing his exit and hinting at what his next step might look like, it seems clear that at least one chapter of the long running Hipgnosis saga looks like it will be drawing to a close.
