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Shareholders in UK-listed Hipgnosis Songs Fund (HSF) have overwhelmingly voted in favor of paying corporations who make credible acquisition bids for the agency’s catalog a one-off incentive payment of as much as £20 million.
Some 99.9% of HSF shareholders in the present day (February 7) accepted a proposal put ahead by the corporate’s board for the ‘bung’ fee.
This might lead to a number of corporations every being paid a ‘bung’ of as much as £20 million by HSF’. The preliminary announcement of the ‘bung’ proposal from HSF’s board (on January 23) confirmed that, if accepted, a £20 million payment can be paid to “any potential bidder(s) who approaches the Board looking for to make an acquisition of the property of the Firm on phrases recommendable by the Board to shareholders”.
The £20 million bung proposal, in keeping with the HSF board, was created for one main purpose: in order that would-be bidders for HSF’s catalog aren’t delay from making a bid because of the notorious ‘name choice’ held by HSF’s present funding adviser, Hipgnosis Music Administration (HSM).
Stated ‘name choice’ decrees that, ought to HSM ever be fired as HSF’s funding adviser – both by the present HSF board, or by a brand new proprietor of the corporate – a clause can be triggered that permits HSM to amass HSF for a pre-set sum.
That pre-set sum can be the upper of: (i) Hipgnosis Songs Fund’s public market capitalization; (ii) Hipgnosis Songs Fund’s ‘truthful worth’ as adjudicated by an impartial valuer; or (iii) The worth {that a} separate and credible third-party is prepared to pay to amass HSF (i.e. an identical proper).
As common MBW readers will know, HSM is majority-owned by Blackstone, and was based by Merck Mercuriadis. (Since final week, Mercuriadis has turn out to be HSM’s Chairman; he has been succeeded as HSM’s CEO by Ben Katovsky, previously HSM’s President and COO.)
It’s a good assumption, then, that the now-approved £20 million ‘bung’ provision exists as an inducement for corporations who’re interested by shopping for HSF’s portfolio (or a part of it), however who’re dissuaded from making a bid because of the risk of HSM’s ‘name choice’.
Right here’s a hypothetical state of affairs of why one such firm could also be delay:
- Firm A buys HSF portfolio for $3 billion;
- Firm A sacks Hipgnosis Music Administration (HSM) as funding adviser;
- HSM makes use of its ‘name choice’ to amass HSF from Firm A for $3 billion utilizing the matching proper;
- Firm A is left with out the HSF portfolio, however on the hook for the price of the preliminary acquisition course of, together with its related authorized charges.
Talking in the present day in regards to the HSF board’s success in getting the £20 million ‘bung’ over the road, HSF Chairman, Rob Naylor, mentioned: “The [HSF] Board wish to thank shareholders for his or her persevering with assist, as evidenced by 99.9% of votes forged in favour of the modification to the articles.
“The Board stays targeted on the strategic overview, underneath which it’s taking a look at all choices to ship shareholder worth. The Board will replace shareholders as to the result of due diligence in the end.”
Hipgnosis Songs Fund is at the moment present process a strategic overview, led by Shot Tower Capital.
Amongst different issues, this overview will take into account the present impartial valuation of HSF’s portfolio that’s at the moment used to find out HSF’s Internet Asset Worth (NAV). (Stated impartial valuation is at the moment carried out completely by Citrin Cooperman.)
Including intrigue to this story: Final month, Hipgnosis Music Administration made a proposal to completely rescind its ‘name choice’, in alternate for a multi-year assure that it could proceed as HSF’s funding adviser.
Stated HSM in an announcement on January 19: “In an effort to take away any confusion, Hipgnosis Music Administration confirms that it verbally communicated to the Board in December 2023 it was prepared to concede [its] Name Possibility as a part of a negotiation for a brand new multi-year Funding Advisory Settlement.
“This was formalised in a written proposal that was delivered to the Board on 16 January 2024 and re-affirmed in additional written correspondence on 17 January 2024.
“This place displays Hipgnosis Songs Administration’s need to stay the Funding Adviser to the Firm and work constructively and collaboratively with the Board to maximise shareholder worth.”
Rob Naylor and his board at HSF subsequently publicly dismissed this provide from HSM (as indicated within the all-important phrase “unconditionally”) through the next assertion from HSF, issued on January 23:
“The Newly Constituted Board has requested for the Funding Adviser, Hipgnosis Songs Administration, which is majority owned by funds managed and/or suggested by Blackstone, to unconditionally take away the Name Possibility from its Funding Advisory Settlement with instant impact to behave in one of the best pursuits of shareholders as a complete. This request has been refused.”Music Enterprise Worldwide
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