Hipgnosis Songs Fund (HSF) shareholders have officially approved a special resolution that will establish a multimillion-dollar fund to cover prospective catalog buyers’ due diligence costs.
HSF today announced investors’ clear-cut support for the measure – to the tune of 99.9 percent of votes cast in favor of the change. As we previously reported of this newest twist in the highly complex Hipgnosis saga, said measure will specifically enable HSF’s revamped board to reimburse certain potential song-rights purchasers up to £20 million.
By covering due diligence costs, that aggregate sum will presumably help bring the parties to the table in the first place. Back in October, HSF investors voted overwhelmingly against the proposed sale of 29 catalogs to Hipgnosis Songs Capital, which, like HSF’s Hipgnosis Song Management (HSM) investment advisor, is powered by Blackstone.
Among other things, stakeholders maintained that the “call option” held by HSM – and allowing it to swoop in and buy the entirety of HSF’s holdings in several situations – had dissuaded third parties from entering into acquisition discussions, let alone making a competing bid. (Axing the underlying investment-advisory agreement at once, a path already taken into consideration by HSF shareholders, would trigger the call option.)
In theory, as HSF explores options including a possible divestment ahead of a late-April reorganization-plan deadline, the just-finalized £20 million tranche will assuage interested parties’ fiscal concerns and set the stage for a selloff.
And while the special resolution was expected to pass – HSF investors have voiced far-reaching complaints about management (HSM, that is), the company’s direction, its share value, and much else – the 99.9 percent support it garnered is indicative of just how wide the rift between the two Hipgnosis entities has become.
Also apparent is the ineffectiveness of the overtures made by Hipgnosis Song Management and its (seemingly now-former) CEO, Merck Mercuriadis, in an attempt to salvage the HSF-HSM relationship. HSM has for obvious reasons been working to remain aboard as investment advisor – including by offering to strike the call option from a renewed multiyear deal and, last week, announcing the transition of Mercuriadis from CEO to chairman.
“As a matter of prudence,” HSM also requested that HSF’s board “approve the planned transition of Merck’s role.” It’s unclear whether that approval (or a formal response) has arrived; Mercuriadis was still billed as CEO (and his successor, Ben Katovsky, still described as president and COO) at the time of this writing.
Another possible reason for Mercuriadis’ shift into the C-suite background is the high-stakes litigation levied against him, HSM, and HSF alike by the liquidators of a defunct Hipgnosis entity called Hipgnosis Music Limited.
We’ve also covered that ugly and exceedingly convoluted situation (besides the broader HSF meltdown) in detail. On Monday, in a press release entitled “Litigation update,” HSF, distancing itself further from Mercuriadis and HSM, disclosed that it’d appointed its own legal team to review the case.
“The Board has recently appointed Kastle Solicitors, independently of the other defendants, to review the claim,” wrote HSF. “As any liability of the Company arises from Mr Mercuriadis’ conduct and knowledge, the Company intends to seek to secure an indemnity from Mr Mercuriadis and Hipgnosis Songs Management against any liability that might be incurred by the Company resulting from the actions of Mr Mercuriadis or Hipgnosis Songs Management.”