Blackstone prepares to acquire Hipgnosis as Concord refuses to raise offer

Blackstone appears to have won the race for Hipgnosis Songs Fund after rival Concord Music said it would not increase its takeover offer for the music rights investor.

Concord, which is indirectly controlled by Alchemy Copyrights, said on Thursday its $1.25 (£1) per share offer valuing Hipgnosis at £1.21bn would not go higher.

The group agreed to buy Hipgnosis for £1.1bn last month, backed by funding from private equity giant Apollo Global Management.

However, a few days later, a bidding war broke out when asset manager Blackstone submitted a £1.2bn offer after three previous proposals had reportedly been rejected.

Concord, owner of the Round Hill Royalty Music Fund, continued with its current offer before Blackstone increased its own offer to £1.26 billion.

Now that Concord has refused to raise its offer, Blackstone appears set to acquire Hipgnosis, although it still needs approval from at least 75 percent of the latter’s shareholders.

Hipgnosis was co-founded in 2018 by Chic guitarist Nile Rodgers and Canadian Merck Mercuriadis, who previously managed musicians including Morrissey, Iron Maiden and Sir Elton John.

The company has spent more than $2 billion buying back catalogs from major artists such as Neil Young, Blondie and Red Hot Chili Peppers.

It earns royalties every time a song to which it owns the rights is played, but the value of its catalogs has plummeted over the past two years as rising interest rates have made other income-producing asset classes, such as the bonds.

The problems worsened last October when its investors rejected a deal to sell some of the company’s catalogs for £362m to funds advised by Blackstone and voted against continuing the business as an investment fund.

The same month, Hipgnosis canceled dividends after being told its royalty payments would be much lower than anticipated and began a strategic review “with the goal of maximizing shareholder value.”

Since then, the group has had a conflict with its investment advisor, Hipgnosis Song Management (HSM), whose president is Mercuriadis.

Hipgnosis wants HSM to agree to an orderly termination of its investment advisory agreement to help make the acquisition happen.

But HSM warned on April 22 that it would “use all necessary means” to defend its contractual position and interests.

Blackstone’s pursuit of Hipgnosis comes amid a surge in acquisitions of London-listed companies, which are considered undervalued compared to global peers.

In recent years, high-profile names that have fallen into foreign hands include G4S, Hotel Chocolat, fashion brand Ted Baker and supermarket chain Morrisons.

And just last month, cybersecurity group Darktrace, packaging company DS Smith and car dealer Inchcape agreed to be bought.

Actions of hypognosis They fell 2.1 per cent to 102.4 pence on Thursday morning, but have risen about 39 per cent since the start of the year.