UK music fund may walk off stage without encore

Heart of gold. Neil Young’s music may have found a new home. Hipgnosis Songs Fund, struggling UK music rights company which owns Canian-American songwriter’s catalogue, on Thursday accepted a $1.4 billion takeover bid by U.S. rival Concord Chorus, legally known as Alchemy Copyrights. 32% premium pitches collection of tunes by Shakira, Blondie and Red Hot Chili Peppers at slightly above ir shrunken net asset value. Dissatisfied shareholders may not get an encore.

era of higher-for-longer interest rates has been tough on financial appeal of music rights, shrinking net present value of future cash flows from catalogues often stretching deces into future. Hipgnosis reckons a 0.5% increase in discount rate used in those calculations knocks 8% off its worth. As recently as September 2023 company estimated its net asset value at $2.5 billion – 80% more than current bid. That was revised down following an independent review.

But Concord will also inherit a tricky situation stemming from months of b blood between Hipgnosis and company that manages actual artists’ rights. This business, which also operates under Hipgnosis name, is controlled by U.S. private equity giant Blackstone in partnership with founder Merck Mercuriis, Elton John’s former manager.

two sides have tred barbs since Hipgnosis shareholders late last year turned down a deal that would have seen management company acquire some assets from company it vises for a $440 million price. Since n, parties have disagreed on everything from valuation of company’s portfolio to management vehicle’s accounting practices.

A furr complication is that Blackstone-owned management company has an option to buy Hipgnosis assets if it is fired as an investment viser, but must offer a higher price than that paid by an independent bidder. Concord, which has its own organisation to manage music rights, does not need an investment viser. If two sides settle dispute before deal closes, Hipgnosis shareholders get an extra $25 million.

Hipgnosis investors, whose shares h sunk 40% in two years before Concord offer, may not get an encore. For now it looks like only way is up, at last.