The troubled Hipgnosis Songs Fund, whose former CEO Merck Mercuriadis drove up the value of music catalogs with more than $3 billion in acquisitions before overspending and problematic management caused the company to lose more than half of its value, has agreed to a $1.4 billion sales to Nashville-based Concord, the companies announced in the early hours of Thursday. The catalogs involved include assets by Neil Young, the Red Hot Chili Peppers, Shakira and others. The news was first reported by Music Business Worldwide.
The sales takes place after months of upheaval at Hipgnosis, which had launched a strategic review last year after a revolt by shareholders over a planned catalog sell-off and other business plans.
Hipgnosis’ investors will get $1.16 per share in cash, representing a premium of about 32% to Wednesday’s closing price, according to Reuters. The company’s shares, which listed in London in 2018 and have fallen more than 45% from their peak three years ago, rose 31% to $1.15. It is possible that Hipgnosis’ investment adviser HSM, which is backed by Blackstone, could exercise a call option under an agreement that gives it the right to purchase the fund’s portfolio if and when its agreement is terminated.
The deal is the latest acquisition for the rapidly growing Concord, which acquired Round Hill Royalty Fund in a $468 million deal last year. Round Hill’s assets included interest in early Beatles hits like “She Loves You” and “I Saw Here Standing There” as well as songs recorded by the Rolling Stones, Otis Redding, John Lee Hooker, Pat Boone, Ricky Nelson and more.
Hipgnosis chair Robert Naylor said of the deal: “The Board is pleased to announce and unanimously recommend this US$1.4 billion Offer for Hipgnosis from Concord. The acquisition represents an attractive opportunity for our shareholders to immediately realise their holding at a premium, mitigating the risks we see ahead to achieving a material improvement in the share price.
“At the same time, the Board is confident that Concord, one of the world’s leading independent music companies, is the right owner to take on the Hipgnosis catalogue and manage it in the interests of composers and performers.”
Concord CEO Bob Valentine said: “We are pleased to be announcing this Offer for Hipgnosis, which has been unanimously recommended by its Board and has the support of 29.38 per cent. of their shareholders. We believe we are offering a fair price for Hipgnosis’ catalogues and music assets, giving its shareholders the opportunity to realise their investment at a significant premium to the prevailing share price in cash.We believe we can integrate Hipgnosis’ catalogues into our wider portfolio of 1.2 million songs in a way that will deliver benefits for composers, performers and all our stakeholders.”
Hipgnosis, founded in 2018, helped drive the price of music catalogs to new heights by paying top dollar to acquire catalogs from a large number of top producers and songwriters, with Mercuriadis often saying that music catalogs were as valuable an asset as oil or gold. The market followed, spurring a gold rush on catalogs that drove up their value enormously — Hipgnosis paid a reported $100 million for half of Neil Young’s songs catalog; in separate deals Bob Dylan and Bruce Springsteen reportedly were paid as much as four to six times that for theirs — but grew overextended as investors questioned Hipgnosis’ ability to exploit the catalogs it had acquired.
Adding to its woes, interest rates rose and the price of available catalogs grew untenably expensive; Hipgnosis’ value plunged to at times less than half of its 2021 peak of $2.6 billion, according to Citrin Cooperman.