Blackstone wants to acquire Hipgnosis because Concord refuses to make an offer

Blackstone appears to have won the race for the Hipgnosis Songs Fund after rival suitor Concord Music said it would not increase its takeover bid for the music rights investor.

Concord, which is indirectly controlled by Alchemy Copyrights, said on Thursday that its offer of $1.25 (£1) per share, valuing Hipgnosis at £1.21 billion, would not go higher.

The group last month agreed to buy Hipgnosis for £1.1 billion, backed by funding from private equity giant Apollo Global Management.

However, a bidding war broke out a few days later when asset manager Blackstone came forward with a £1.2 billion bid after three previous proposals were reportedly rejected.

Concord, owner of the Round Hill Royalty Music Fund, continued with its current offer before Blackstone increased its own offer to £1.26 billion.

Now that Concord has declined to increase its offer, Blackstone appears set to acquire Hipgnosis, although it still needs approval from at least 75 percent of the latter’s shareholders.

Hipgnosis was co-founded in 2018 by Chic guitarist Nile Rodgers and Canadian-born Merck Mercuriadis, who previously managed musicians such as Morrissey, Iron Maiden and Sir Elton John.

The company has spent more than $2 billion purchasing catalogs from major artists such as Neil Young, Blondie and the Red Hot Chili Peppers.

It earns royalties every time a song to which it owns the rights is played, but the value of its catalogs has fallen in the past two years as interest rate rises have made other income-paying asset classes such as bonds more attractive.

The problems worsened last October when investors rejected a deal to sell some of the company’s catalogs to Blackstone-advised funds for £362 million and voted against continuing the company as an investment trust.

The same month, Hipgnosis canceled dividends after being told royalty payments would be much lower than expected and began a strategic review “with the aim of maximizing shareholder value.”

Since then, the group has been in a dispute with its investment advisor Hipgnosis Song Management (HSM), of which Mercuriadis is chairman.

Hipgnosis wants HSM to agree to an orderly termination of their investment advisory agreement to help the acquisition proceed.

But HSM warned on April 22 that it would “use all necessary means” to defend its contractual position and interests.

Blackstone’s push for Hipgnosis comes amid a wave of takeovers of London-listed companies, which are considered undervalued compared to their global peers.

In recent years, high-profile names that have fallen into foreign hands include G4S, Hotel Chocolat, fashion brand Ted Baker and supermarket chain Morrisons.

And last month, cyber security group Darktrace, packaging company DS Smith and car distributor Inchcape all agreed to a takeover.

Hipgnosis Stocks were 2.1 percent lower at 102.4p late Thursday morning, but are up about 39 percent since the start of the year.