Last month, Hipgnosis Songs Fund (HSF) announced plans to sell 29 catalogs to Blackstone-powered Hipgnosis Songs Capital (HSC) for $440 million. Now, days out from a key investor vote on the proposal, HSF has revealed that it didn’t receive a “superior offer” from a third-party buyer.
Hipgnosis Songs Fund (LON: SONG) formally acknowledged the conclusion of the “go-shop process” today. The unsurprising result has arrived on the heels of ample controversy – and a record-low stock price – for the publicly traded song fund, which says it would put the transaction’s proceeds towards buying back shares and paying down debt.
Against the backdrop of considerable investor criticism, HSF upon unveiling the potential sale said it’d field offers from non-HSC buyers until today; as described by higher-ups, the process would then afford HSC the chance to “match” any such offers.
But at least one executive whose company reportedly explored the possibility of acquiring Hipgnosis IP made clear to the media that the structure of the entity’s sale agreements would render deals “unattractive.”
“‘There are very specific circumstances with Hipgnosis,’” the anonymous source told the Financial Times, “‘and the way potential sales are being structured makes them unattractive.’”
Bearing in mind the point, HSF today said it’d initially been “in contact with 17 parties” in connection with the 29-catalog selloff. Eight of the prospective purchasers signed non-disclosure agreements, according to Hipgnosis, and “one first round non-binding offer was received, but did not subsequently result in a binding bid.”
“The Board received feedback through the process that a number of the parties assessed that they could not justify paying a higher price than the offer from the Buyer for the First Disposal,” Hipgnosis Songs Fund claimed in its detail-light release on the subject.
Notwithstanding the purported absence of a viable offer from a company besides HSC, it seems decidedly far from guaranteed that HSF investors will approve the deal. Scheduled to vote on the sale as well as the continuation of HSF itself on the morning (local time) of the 26th – or around 2 AM in California – key shareholders have emphasized to the media their dissatisfaction with the involved terms and price.
That HSF axed a previously planned dividend, citing a miscalculation concerning retroactive royalty payments, certainly didn’t help the matter. On the other side of the coin – and specifically with regard to the continuation vote – Hipgnosis Songs Fund has launched a “strategic review” and pledged to evaluate “future management arrangements.”
The coming days will reveal whether the latter step and behind-the-scenes discussions have been enough to convince investors to support the continued operation of Hipgnosis Songs Fund. Also worth noting is that some stakeholders said they’d back HSF’s continuation mainly to avoid the sale of its assets – to another, non-publicly-traded Hipgnosis entity or a different business altogether – for a lower-than-desirable price.
During today’s trading hours, HSF stock parted with 2.79 percent of its value and finished at about 73 pence (currently 89 cents) per share.