The boards of Conchord Chorus Limited (an entity controlled by Alchemy Copyrights) and Hipgnosis have reached agreement on the terms of a recommended cash offer for Hipgnosis at US$1.16 in cash for each Hipgnosis share.
In addition, if the current investment adviser agrees to terminate the Investment Advisory Agreement with effect from the date that the deal becomes effective, shareholders will be entitled to share in an additional consideration of up to US$25m – about 2 cents per share – (US$25m less any amount payable to the investment adviser). However, this needs to be agreed no less than five days before the deal becomes effective.
The deal:
- values the entire issued and to be issued ordinary share capital of Hipgnosis at approximately US$1,402.7m.
- is equivalent to £0.932 per share
- represents a premium of approximately 32.2% to the closing price on 17 April 2024
- or 4.3% to the adjusted 30 September 2023 operative NAV of US$1.11.
Background
Concord has been an active acquirer of music rights and companies for over a decade, with a proven track record of strategic acquisitions and catalogue expansion. Since 2015, Concord has deployed more than US$2.8bn of capital and completed more than 100 transactions across recorded music, music publishing and theatricals, as it seeks to grow its business and scale and leverage its operations.
Concord is a full-service music and theatrical rights company with an extensive new release artist and writer programme. Concord’s global team provides artists, songwriters, playwrights and composers with creative and administrative support in sync, licensing, marketing, promotion and A&R.
Concord continues to be active in the market, looking at many potential transactions that meet its investment criteria. Concord and its management have followed the progression of Hipgnosis since IPO and believe that Hipgnosis’ assets complement Concord’s long-standing objective to acquire high quality and long-term music assets. Concord believes that the quality of Hipgnosis’ assets are consistent with Concord’s existing holdings, and creators connected to the rights acquired will benefit from the services of Concord’s existing creative and administrative support teams globally.
Concord intends to implement the acquisition with the support of its long-term financing partner, Apollo Global Management, Inc. via certain investment funds, accounts or entities managed, advised and/or affiliated with, and/or owned (in whole or in part) or controlled by, Apollo Capital Management, L.P. and/or one or more or its affiliates. Apollo has committed to provide financing for the acquisition in the form of debt capital, as well as a minority, indirect equity interest in the Concord-controlled Bidco.
Following completion of the acquisition and a short transition period, it is expected that Concord will take over the management of Hipgnosis’ assets.
The board is recommending the deal unanimously. In addition, the bidder has received irrevocable undertakings in favour from Asset Value Investors Limited, CCLA Investment Management, Schroder & Co Limited, J O Hambro Capital Management Limited, Madison Avenue Partners, LP, Gresham House Asset Management Ltd, Hawksmoor Investment Management and Premier Fund Managers Limited in respect of, in aggregate, 284,917,641 Hipgnosis shares representing approximately 23.56% of Hipgnosis’ issued share capital.
In addition, there is a letter of intent from Investec Wealth & Investment Limited in respect of, in aggregate, 70,000,000 Hipgnosis shares or 5.79% of the company.
The way that the deal is structured, it needs support from at least 75% of those voting on it.
We should see some documents within 28 days and the plan is to get the deal done by the third quarter of 2024.
[QD comment: After the many disappointments of the past couple of years, finally some good news. While this would crystallise a loss for many investors, it provides an exit at a price higher than any we have seen since about September 2022. It is possible that this kick starts a bidding war, it is also possible that the manager will find a way to exercise its pre-emption right to buy the portfolio at the same price. The drama may not be over yet but it does feel like we are in the final Act.]
SONG : Hipgnosis gets bid from Alchemy Copyrights