Hipgnosis Songs Fund has tabled a special resolution offering up to £20m to any prospective bidders seeking to acquire the trust’s assets.
In a move to entice buyers, the proposal seeks to provide protection to prospective bidders who receive a board recommendation against their due diligence and acquisition costs. The trust’s board has called an extraordinary general meeting to vote on the proposal.
The move comes after Hipgnosis shareholders rejected the proposed sale of 29 music catalogues for $440m (£346m) to a Blackstone-backed private equity vehicle at the trust’s AGM on 26 October last year.
The board then underwent a series of changes, with a strategic review launched to assess the trust’s options for its future underway following a vote against continuation.
Call option concerns
In a stock exchange announcement this morning (18 January), the trust’s chair Robert Naylor said shareholders had concerns over investment adviser Hipgnosis Songs Management (HSM) and its ‘call option’.
The option gives HSM the right to purchase the trust’s portfolio if its position as investment adviser is terminated.
Merck Mercuriadis, current chief executive of HSM, is the founder of Hipgnosis.
Naylor said: “From our shareholder consultation, core to the requirement for change is addressing the call option held by our investment adviser HSM. This not only acts as a structural conflict between the interests of our shareholders and the investment adviser, but also creates a significant deterrent to potential bidders for the company’s assets thereby depressing the value of the company.
“It is against this backdrop that we are proposing to change our articles to allow potential bidders to put forward their proposals for the company’s assets, with significant cost protection, if supported by a board recommendation to shareholders.”
He added that ‘many’ of the trust’s largest shareholders are supportive of the proposal.
HSM declined to comment when reached out to by Portfolio Adviser.