Hipgnosis Songs Fund’s board of directors announced Thursday that the company will sell two segments of its song catalog in a bid to increase its stock price and pay down debt.
The statement, made in a dense 20-page document capably translated into plain English by Billboard, reveals that one package of assets includes 29 catalogs worth around $440 million, which the Blackstone-backed entity, Hipgnosis Songs Capital, has agreed to acquire. The second package is worth $25 million and includes songs acquired in 2020 from Kobalt; the fund expects to announce a buyer later this month.
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The board introduced the $465 million in proposed sales along with proposals to buy back up to $180 million of its own stock, to pay down $250 million of its revolving debt and to introduce lower advisory fees to be paid to Hipgnosis Song Management Limited. The company was founded by Merck Mercuriadis in 2018 and has since acquired catalogs by Neil Young, Justin Timberlake and others, including many major songwriter-producers who may not be household names but have credits on an enormous number of hits.
The proposals, which must be approved by shareholders, will be a “catalyst for a re-rating of the company’s share price … (which) over the last 18 months … has not reflected the fundamental value of the company,” the board said in a statement.
While there is little question that the catalog-sale gold rush — which Hipgnosis’ billions of dollars in acquisitions played a major role in igniting — has cooled off in recent months, Concord’s $469 million bid for Round Hill Music Royalty Fund last week has set off a stock-price rise.
“Given the substantial share price discount to fundamental value in recent months, share buy backs enable (Hipgnosis Songs Fund Ltd) to invest further into the remaining portfolio at a material discount to its fundamental asset value,” according to the statement. “These disposals are of the smallest magnitude possible that would provide the required capital to execute on this strategy, whilst ensuring that the ongoing investment case for Hipgnosis Songs Fund remains intact by protecting the strength of the remaining portfolio.”
The board says that the proposed sale worth $440 million includes catalogs from Shakira, Barry Manilow, Rick James, Nelly and others.
The proposed sale price represents a multiple of 18.3x historical net publisher share, according to the statement, and is “designed to protect the strength of the remaining portfolio” because it will leave the London Stock Exchange-listed Hipgnosis Song Fund with a “concentration of culturally important and successful songs.”
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