The Kaiser Chiefs, whose catalog will be sold (along with 28 others) should Hipgnosis Songs Fund investors approve a proposed $440 million divestment. Photo Credit: Jaguar MENA
Last month, Hipgnosis Songs Fund (LON: SONG) proposed a close to $500 million selloff of multiple catalogs. Now, ahead of two high-stakes investor meetings later in October, major shareholders are reportedly preparing to block the transaction.
This latest less-than-ideal development for Hipgnosis Songs Fund (HSF) came to light in a Financial Times report today, shortly after Hipgnosis Songs Group CEO Kenny MacPherson was placed on leave due to newly levied sexual assault allegations.
To recap – Digital Music News covered the initially mentioned music-IP sale plans in detail when they emerged in mid-September – Hipgnosis Songs Fund scooped up all manner of music catalogs between 2018 and 2021.
But its credit line has long been tapped out (preventing the purchase of additional song rights), and shares have for some time been trading at a major discount to the claimed value of its assets (barring new issuances).
Against this backdrop and well-documented investor calls for a partial divestment to free up capital, HSF three weeks back proposed offloading 29 catalogs, including the rights to the work of Shakira, Barry Manilow, and L.A. Reid, to Blackstone-powered Hipgnosis Songs Capital (HSC) for $440 million.
However, 20 days out from a scheduled vote on the proposal – and, separately, the operational fate of HSF – at an annual general meeting and an extraordinary general meeting, certain stakeholders are reportedly expressing reservations about and planning to block the sale.
The FT pointed to “significant investor opposition” to the suggested selloff, with the floated price tag driving much of the pushback. A “top 10 investor” communicated that the sale “‘might make sense’” if the involved value was 30 percent higher and touched upon a perceived lack of transparency concerning transactional costs, according to the report.
“‘I’d be stunned if it doesn’t get voted down,’” another shareholder summed up of the possible $440 million sale, highlighting different investors’ purported opinions and the sizable discount to net asset value compared to the sale of Round Hill Music’s own publicly traded song fund. The latter brought an 11.5 percent discount to NAV, whereas the HSF sale as outlined would have a discount rate exceeding 24 percent, per the FT.
Interestingly, other investors indicated that they might vote in favor of HSF’s continuation in any event, citing confidence in the underlying assets and a desire to avoid the fire sale that may arrive if the measure fails.
Meanwhile, a different party could technically come forward with an offer for more than $440 million. But one “senior executive” whose company reportedly explored the possibility of buying Hipgnosis assets thought the outcome unlikely.
“‘There are very specific circumstances with Hipgnosis,’” the individual relayed, “‘and the way potential sales are being structured makes them unattractive.’”
Lastly, HSF in September also disclosed plans to sell $25 million worth of “non-core” assets obtained from the first fund of Kobalt – albeit without pinpointing a buyer. According to the FT, though, this prospective buyer is Kobalt itself.
Hipgnosis Songs Fund shares finished today near a 52-week low, reflecting a market cap of about £907 million (currently $1.11 billion). Per an announcement put out by the company to end September, Andrew Sutch intends to step down as chair “once a suitable replacement is found and, in any event, at or before the Company’s annual general meeting in 2024,” and Andrew Wilkinson will “retire as a director before the end of 2023.”
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