Concord Chorus Limited (Bidco) – an entity controlled by Alchemy Copyrights – has agreed to purchase the entire issued share capital of the beleaguered music royalties investment trust, Hipgnosis Songs Fund.
The proposed deal values the entire capital of Hipgnosis at $1.4bn, which equates to $1.16 (£0.932) per share. This represents a premium of 32.2% to its closing price last night (17 April), according to QuotedData, or a 4.3% premium relative to the adjusted operative NAV as at 30 September last year.
Concord, which currently has a catalogue of more than 260,000 active albums and 600,000 copyrighted works under its belt, has been acquiring music copyrights for more than a decade. Since 2015, it has deployed more than $2.8bn of capital into recorded music, music publishing and theatricals across more than 100 transactions. The firm purchased fellow music royalties investment trust, Round Hill Music, in 2023.
It intends to acquire Hipgnosis alongside its long-term financing partner, Apollo Global Management. Apollo will provide financing via debt capital as well as minority, indirect equity interest in Bidco.
An update from Hipgnosis, announced on the stock exchange this morning, said: “Concord continues to be active in the market, looking at many potential transactions that meet its investment criteria. Concord and its management have followed the progression of Hipgnosis since IPO and believe that Hipgnosis’ assets complement Concord’s long-standing objective to acquire high quality and long-term music assets.
“Concord believes that the quality of Hipgnosis’ assets are consistent with Concord’s existing holdings, and creators connected to the rights acquired will benefit from the services of Concord’s existing creative and administrative support teams globally.”
Hipgnosis’s boar recommends the deal, while Concord has received support in favour of their acquisition from the likes of Asset Value Investors, CCLA, Schroders, JOHCM, Gresham House Asset Management, Madison Avenue Partners, LP, Hawksmoor Investment Management and Premier Funds Management. Combined, these shareholders account for 23.6% of Hipgnosis’s issued share capital.
In order for the deal to get over the line, it will require a 75% approval rate from shareholders. The aim is for the deal to be completed by Q3 2024.#
Sachin Saggar, analyst at Stifel, said the cash offer price of 93p “seems like a fair price” relative to the work required to rehabilitate the trust, as well as the “short-term positive headwinds” in the music sector at present.
“We always considered the assets as “liquid” but believed a sale would take longer given the issues that needed to be resolved. There has been considerable churn in the shareholder base and value buyers would have generated an attractive return.
“IPO investors that participated in subsequent capital raises we think would have largely broken even after dividends. Hence, while the stock has been intensive from a resource perspective, from a return perspective it has been okay.”
Saggar added: “Our interactions with investors suggest that shareholders will welcome the offer as they look to move past this saga. The bid is also likely helpful for the investment trust sector where sentiment has been poor and demand for liquidity high.”
Commenting on the bid, a spokesperson for QuotedData said: “After the many disappointments of the past couple of years, finally some good news. While this would crystallise a loss for many investors, it provides an exit at a price higher than any we have seen since about September 2022.
“It is possible that this kick starts a bidding war, it is possible that the manager will find a way to exercise its pre-emption right to buy the portfolio at the same price. The drama may not be over yet but it does feel like we are in the Final Act.”
