In a statement issued today (2 February 2024) on Hipgnosis Songs Fund’s (SONG’s) website (click here to read), it has been announced that Merck Mercuriadis, founder of SONG’s the management company has stepped down from his role as its chief executive but will be staying on as the chair of the manager’s board. Ben Katovsky, who was Hipgnosis Songs Management’s (HSM’s) president and chief operating officer, steps up to become CEO in Merck’s stead. Ben joined HSM in 2022 and has two decades’ experience working in the music industry. He is also a director of HSM. Blackstone, which owns a majority stake in HSM as part of a partnership launched in 2021, has thrown its weight behind these moves.
Has much changed for Merck?
In his role as chair, Merck will continue to devote the majority of his time to HSM. Furthermore, he will continue to lead engagement with songwriters, artists and the music industry, generate opportunities to increase consumption and enhance the value of HSM’s client’s portfolios, lead acquisitions and advocate on behalf of songwriters, artists and HSM.
However, as CEO, Ben will assume responsibility for executive management of the business, implementing HSM’s strategy to build on the company’s position and will ensure HSM delivers a high quality, value adding service to HSM’s clients and their shareholders.
The statement says that Ben has extensive experience of building, leading and growing music companies as well as implementing strategies to increase the value of music catalogues. It also said that HSM has asked the board “to approve the planned transition of Merck’s role”.
[QD comment: HSM’s statement gives no indication on whether approval of these moves was actually forthcoming. However, it has been little secret that there has been friction between the new board of SONG and HSM, particularly with Merck at the helm. The board had previously called upon HSM to give up its call option on the portfolio that is built into the management agreement, which is obviously a conflict of interest between SONG shareholders and HSM, but this was flatly rejected.
Another bone of contention surrounds a deal for a private Blackstone-backed vehicle, Hipgnosis Songs Capital, to purchase 29 catalogues from SONG for $465m. This deal looked cheap at the time and came under fire as the manager was accused of cherry-picking assets that were growing at materially higher rates to the overall portfolio for inclusion in this deal. This led the board to launch an investigation into whether the deal was fair and disclosed appropriately to the previous board.
From what we can see, this rearranging of deck chairs arguably shifts Merck away from having to deal with SONG’s board directly, but the statement suggests that he will still be very much a part of the ongoing business, presumably with a significant amount of control, and so we cannot see how these shifts really address the main issues that have come to light. Looking at the share price move today, it would seem that the market doesn’t think that much of this news either, with SONG’s shares down 2.24% today, against a move for the broader market of -0.045%.]