After $1.5bn takeover proposal, Hipgnosis Songs Fund’s board tells Blackstone: We’re listening…

Yesterday (April 20), MBW told you that Blackstone had submitted a proposal with a view to acquiring Hipgnosis Songs Fund (HSF) for approximately USD $1.50 billion.

That proposal was not – just as MBW reported and Blackstone made clear – a “firm offer”… yet.

Before issuing a “firm offer”, Blackstone is waiting on the reaction from the board of UK-listed HSF. Today (April 21) that reaction has arrived.

In a statement sent to MBW today, HSF’s board has confirmed that, in the past 24 hours, it received an “improved proposal” from Blackstone to acquire the share capital of Hipgnosis Songs Fund.

The HSF board statement continued: “The Board, having reviewed the Proposal with its financial adviser, Singer Capital Markets, has indicated to Blackstone that the Proposal is at a value that it would be minded to recommend to its shareholders should Blackstone announce a firm intention to make an offer [on] such financial terms.”

Blackstone’s proposal challenges a previous bid for Hipgnosis Songs Fund by Concord – via Concord Chorus – at a price of $1.402 billion (with a potential up-to-$25 million additional bonus).

Just over 23% of HSF’s shareholders have already made an “irrevocable” commitment to accept Concord’s offer – leaving around 77% of HSF’s shareholders yet to officially make up their mind.

In its new statement RE: Blackstone today, HSF’s board said: “The Board and its advisers will continue to provide Blackstone and its advisers access to confirmatory due diligence, to enable Blackstone to announce a firm intention to make an offer, as soon as possible.

“There can be no certainty that a firm offer will be made for the Company by Blackstone, nor as to the terms of any such offer. Accordingly, shareholders are advised to take no action at this time with regard to the approach by Blackstone.

“The Hipgnosis Directors continue to recommend unanimously to Hipgnosis shareholders the cash offer by Concord Chorus Limited, an entity indirectly controlled by Alchemy Copyrights LLC. That recommendation has not been withdrawn, qualified or modified.”

In its announcement of its $1.5 billion proposal yesterday, Blackstone made reference to Hipgnosis Song Management – the investment adviser of HSF, and a firm co-owned by Blackstone and Merck Mercuriadis.

HSM has a ‘call option’ in its agreement with HSF that would provide HSM with the guaranteed opportunity to acquire HSF’s portfolio under a number of set conditions, should HSM ever be fired as HSF’s investment adviser.

Some observers have questioned whether HSF’s board may legally test this ‘call option’, particularly in light of a recent report on HSF’s accounting by Shot Tower Capital, which made a number of criticisms of HSM’s practices.

Blackstone, however, has made clear that it has faith in the legal solidity of HSM’s ‘call option’, should it ever need to lean on it.

Said Blackstone yesterday: “Blackstone and its portfolio company HSM, having taken extensive legal advice, remain confident in the enforceability of the Option.

“Blackstone is seeking to find a positive outcome for all shareholders at a fair and reasonable value; however, Blackstone and HSM value the contractual protections under the IAA and will vigorously defend HSM’s rights pursuant to the Option if required to do so.”Music Business Worldwide