TIDMSONG
RNS Number : 4385M
Hipgnosis Songs Fund Limited
14 September 2023
This announcement contains inside information for the purposes
of the UK Market Abuse Regulation.
LEI: 213800XJIPNDVKXMOC11
Hipgnosis Songs Fund Limited ("Hipgnosis Songs Fund" or the
"Company")
Hipgnosis Songs Fund agrees sale of 29 Catalogues to Hipgnosis
Songs Capital to fund a share buy back programme and reduce debt as
part of strategic proposals designed to narrow the discount and
re-rate the Company's share price
14 September 2023
The board of directors of Hipgnosis Songs Fund Limited (the
"Board"), the first UK listed investment company offering investors
a pure-play exposure to songs and associated intellectual property
rights, and its investment adviser, Hipgnosis Song Management
Limited ("HSM" or the "Investment Adviser"), are pleased to
announce proposals which they believe will act as a catalyst for a
re-rating of the Company's share price:
-- Catalogue sales for aggregate gross consideration of $465 million;
-- Share buy back programme of up to $180 million;
-- Repayment of $250 million drawn under the Company's revolving credit facility ("RCF"); and
-- Introduction of additional, lower investment advisory fee tiers.
These proposals are subject to, amongst other things,
shareholder approval of all required resolutions at an
Extraordinary General Meeting ("Extraordinary General Meeting" or
"EGM") and the 2023 Annual General Meeting ("2023 AGM") which are
both expected to be held no later than 25 October 2023.
Strategic rationale
The Board and the Investment Adviser believe that, over the last
18 months, the Company's share price has not reflected the
fundamental value of the Company.
A consultation with major shareholders in Spring 2023 confirmed
that whilst shareholders continued to believe in the Company's
significant long-term growth opportunity, a proactive approach to
addressing the current share price, including a meaningful share
buy back programme and reduction in the Company's revolving credit
facility drawings, was important.
These disposals are of the smallest magnitude possible that
would provide the required capital to execute on this strategy,
whilst ensuring that the ongoing investment case for Hipgnosis
Songs Fund remains intact by protecting the strength of the
remaining portfolio.
The Board and the Investment Adviser continue to believe that
the best way to maximise long-term shareholder value is to buy,
hold and actively manage culturally important assets that will
deliver income and capital growth over time. Furthermore, they
believe that the Company's long-term value has yet to be fully
realised .
This opportunity for growth was demonstrated in the financial
year ended 31 March 2023 when the Company reported its best
like-for-like income growth to date of 12.1% year-on-year. The
Board and the Investment Adviser are confident of showing strong
further growth as the Company benefits from the structural
tailwinds of the continued monetisation of music consumption and
the Investment Adviser adds value through active Song
Management.
Proposed transactions
First portfolio
Firstly, the Company has agreed the sale of 29 music catalogues
(the "First Disposal Portfolio") for cash consideration of $440
million, reflecting a multiple of 18.3x historical Net Publisher
Share, to Hipgnosis Songs Capital, a partnership between Hipgnosis
Song Management and funds managed and/or advised by Blackstone (the
"First Disposal"). The First Disposal is expected to realise a
total net return of 44% over a 3 year weighted average life of
ownership.
-- The First Disposal Portfolio was designed to protect the
strength of the remaining portfolio after completion of the First
Disposal, as follows:
o Hipgnosis Songs Fund will retain 81% of its existing portfolio
by Fair Value with an increased focus on older vintages (First
Disposal Portfolio average vintage being 2008, compared to existing
portfolio average of 2003);
o The remaining portfolio is expected to deliver strong income
growth over the medium term;
o The remaining portfolio will have an increased concentration
of culturally important and successful songs, with the Company
retaining an interest in 47 of Rolling Stone's 500 Greatest Songs
of All Time (existing portfolio has 52 of these songs) and 85
Spotify Billions Club (existing portfolio at 12 September 2023 has
106/473); and
o Hipgnosis Songs Fund will retain its ownership in seven of its
ten largest catalogues.
-- All catalogues would continue to be managed by Hipgnosis Song
Management, maintaining the goodwill of Artists and Songwriters and
enabling the Investment Adviser to maximise income by Song
Management of the Company's remaining portfolio.
-- The First Disposal purchase price reflects:
o A premium of 26% to acquisition price of the First Disposal
Portfolio;
o A premium of 51% to the valuation of the First Disposal
Portfolio implied by the Company's 30-day average market
capitalisation up to 13 September 2023; and
o A discount of 17.5% to the fair value of the First Disposal
Portfolio as at 31 March 2023.
-- The First Disposal is conditional upon, inter alia, the
approval of the sale (the "Asset Sale Resolution") by independent
shareholders at the EGM and the approval by shareholders of the
continuation resolution (the "Continuation Resolution") at the
Company's 2023 AGM.
On the basis of the terms agreed with Hipgnosis Songs Capital,
the Company expects to pay approximately $6.7 million in
corporation tax. By use of the Company's tax losses, it has been
possible to mitigate the majority of the Corporation Tax which
would otherwise have been payable on the accounting profit on the
sale of these assets.
Second portfolio
Secondly, the Company has agreed in principle, subject to
completion of legal documentation and the consent of the Company's
lending banks, to sell a portfolio of non-core songs (the "Second
Disposal Portfolio") for a consideration of approximately $25
million (the "Second Disposal").
The Second Disposal Portfolio songs were acquired as part of
Kobalt Fund One and their eventual sale was part of the Company's
acquisition strategy, as they were considered non-core as the
Company does not have perpetual ownership rights or the songs
require ongoing accounting and reporting obligations that take up
significant bandwidth which can be better focused on active Song
Management.
Use of proceeds
The Company intends to use the net proceeds of the disposals to
establish a share buy back programme of up to $180 million; repay
$250 million of the Company's drawings under its revolving credit
facility; and enhance financial flexibility. Given the substantial
share price discount to fundamental value in recent months, share
buy backs enable the Company to invest further into the remaining
portfolio at a material discount to its fundamental asset
value.
Investment Advisory Agreement
In addition, the Company has agreed an amendment to the
Investment Advisory Agreement in place between the Company and the
Investment Adviser such that, subject to completion of the First
Disposal to Hipgnosis Songs Capital, the calculation of the annual
advisory fee payable by the Company to the Investment Adviser will
be amended to include additional lower tiers, as are set out in the
Amendment to Investment Advisory Agreement section below. Th is is
expected to provide the Company with lower ongoing operating costs
whilst maintaining the Investment Adviser's alignment with the
Company's share price performance.
Related party considerations
The Investment Adviser is majority owned by funds managed and/or
advised by Blackstone, which together also own the majority of
interests in Hipgnosis Songs Capital, the proposed purchaser of the
First Disposal Portfolio. The proposed sale of the First Disposal
Portfolio to Hipgnosis Songs Capital therefore constitutes a
related party transaction for the purposes of Listing Rule 11 and
is conditional upon, among other things, the approval of the
Company's independent shareholders at the EGM to be convened for
that purpose.
Given that Hipgnosis Songs Capital and the Investment Adviser
are under common control and, additionally, the Investment Adviser
acts as investment adviser to Hipgnosis Songs Capital, the Board
put in place appropriate governance arrangements and information
barriers to ensure the continued availability to it of a segregated
team of the Investment Adviser to consider and advise on the First
Disposal, none of whom were available to or have any financial
interest in Hipgnosis Songs Capital.
In addition, the Company notes that Mr Mercuriadis, and certain
employees of Hipgnosis Song Management, have disclosed to the Board
that they hold a minority interest in the share capital of
Hipgnosis Songs Capital.
Go-Shop provision
The terms of the First Disposal include a "Go-Shop" provision,
pursuant to which the Board is entitled to solicit alternative
offers for the First Disposal Portfolio for a period of 40 days
from the date of this announcement. Hipgnosis Songs Capital has the
right to match any Superior Proposal (as defined below). The
Company may terminate the agreement if it receives and settles the
transaction documents in respect of a Superior Proposal and
Hipgnosis Songs Capital does not match that proposal within 5
Business Days of having been notified by the Company. On any such
termination a fee of $6.6m will be payable by the Company to
Hipgnosis Songs Capital. In determining whether to exercise any
termination right the Board will act in the best interests of
shareholders including considering whether any such Superior
Proposal, if completed, would result in higher aggregate cash net
proceeds and deliver greater long-term value to the Company's
shareholders.
Full details of the terms of the Go-Shop provision are set out
in the Principal Terms of the First Disposal section below.
Shareholders will be notified via a Regulatory Information
Service of the outcome of the Go-Shop process in due course and in
any event before the EGM and 2023 AGM are held.
In the event a Superior Proposal is received during the Go-Shop
period the Board expects it will be necessary to adjourn the EGM
and 2023 AGM, no later than 30 November 2023.
Background to the recommendation
The Board and the Investment Adviser believe these proposals
provide an attractive opportunity for the Company to re-rate its
share price and strengthen its platform to deliver future income
and capital growth.
The Board considers the proposals described in this announcement
and the passing of the Asset Sale Resolution, the Continuation
Resolution and each of the other resolutions to be proposed by the
Board at the 2023 AGM to be in the best interests of the Company
and its shareholders taken as a whole. Accordingly, the Board
intends to unanimously recommend that shareholders vote in favour
of these resolutions at the EGM and the 2023 AGM, as appropriate,
in due course.
The Company intends to publish a circular which is expected to
be posted to Company shareholders no later than 27 September 2023
which will include the notice convening the Extraordinary General
Meeting, expected to be no later than 25 October 2023, to consider
and, if thought fit, to pass, the Asset Sale Resolution. The
circular will also contain a notice convening the 2023 AGM for the
same date.
The Board and the Investment Adviser are committed to on-going
engagement with shareholders on the Company's future strategy, with
a second Continuation Vote scheduled to be held at the Annual
General Meeting in 2028.
J.P. Morgan Cazenove is acting as sponsor and financial adviser
to Hipgnosis Songs Fund in respect of the First Disposal.
Merck Mercuriadis, CEO and Founder of Hipgnosis Song Management
and Founder of Hipgnosis Songs Fund said:
"Earlier this year we initiated consultations with shareholders,
in contemplation of the Continuation Vote and our concerns that the
true value of our iconic songs was not being reflected in our share
price. It was clear that shareholders shared our belief in the
continuing long-term opportunity of Hipgnosis Songs Fund and wished
to see a significant share buy back programme and reduction of our
leverage in order to deliver a re-rating in the share price.
"The transactions announced today allow us to execute on that
strategy and reflect our determination to deliver immediate
shareholder value and enhance the Company's position to deliver
long-term exceptional returns and capital growth through our
investment strategy of 'buying, holding and actively managing' a
major portfolio of iconic songs as they benefit from the continued
growth of streaming.
"I'm delighted that through this transaction with Hipgnosis
Songs Capital, not only are we able to execute the strategy of
share buy backs and reducing leverage but also give clear
transactional evidence, alongside other recent transactions in the
market, of the current realisable value of the Company's catalogues
to help investors understand and have confidence in the Company's
asset value. The purchase price of the sale of catalogues to
Hipgnosis Songs Capital realises a total return of 44%, which
validates our investment strategy despite the current economic
challenges.
"In transacting with Hipgnosis Songs Capital, and reflecting
both my own and Hipgnosis Song Management's relationship with
Hipgnosis Songs Fund and Hipgnosis Songs Capital, our
responsibility and duty of care to Hipgnosis Songs Fund's
shareholders has been of paramount importance. For that reason, our
focus throughout has been to execute a strategy designed to re-rate
the share price while protecting the quality of the remaining
portfolio, which going forward will have a greater focus on older
vintage songs and retain the majority of the Company's largest
catalogues. An important part of that responsibility has been to
include a "Go-Shop" provision which importantly Hipgnosis Songs
Capital would have the right to match. This ensures the highest
level of corporate governance and shareholder protection.
"Equally importantly, our Company's success has been built upon
our ethos and commitment to Songwriters to be conscientious
custodians of their songs. With these deals, Hipgnosis Song
Management will continue its management of all our catalogues
acquired from Songwriters, Producers and Artists by Hipgnosis Songs
Fund ensuring we maintain our ethos and protect Hipgnosis' unique
ability to work with Songwriters, Producers and Artists to maximise
income and capital growth. The importance of this is understood and
acknowledged by our shareholders.
"I believe these deals will deliver immediate value for
shareholders through a re-rating of the shares and position
Hipgnosis Songs Fund to deliver superior returns to shareholders
over the medium and long-term.
"The Company recently delivered the best like-for-like results
in its history and is in a perfect position to capitalise on the
demonstrated pricing power of the DSPs, the successful passing of
CRB III and CRB IV and songwriters being paid at the highest rates
ever in the streaming era as we see more than a billion paid
subscribers to music streaming services in sight. All this gives us
great confidence for the future.
"With the support of our shareholders in the continuation vote,
Hipgnosis Songs Fund will move forward stronger than before with a
portfolio of culturally significant, iconic songs that will be
listened to for decades to come, providing long-term resilient
income streams and the potential for significant capital
growth."
Andrew Sutch, Chairman of Hipgnosis Songs Fund said:
"As a Board, we have been clear for some time that the Company's
share price does not fully reflect the value of Hipgnosis Songs
Fund's Portfolio. Having consulted with many of our largest
shareholders, considered a wide range of options and taken
independent advice we are confident the proposals set out today
provide a compelling opportunity to deliver immediate shareholder
value whilst protecting our ability to deliver superior returns
over the medium term.
"These proposals will enable the Company to instigate a
substantial share buy back programme and reduce its debt whilst
enhancing the quality of the remaining Portfolio and ensure we
maintain the goodwill of Songwriters and Artists, helping the
Investment Adviser maximise future shareholder value through Song
Management.
"Importantly, whilst the Company has been consistent in its view
that the best way to realise the long-term value from its assets is
to hold in perpetuity, given the Company's recent share price, the
sales of a small proportion of the Company's portfolio will enable
the launch of a material share buy back programme which we believe
will result in a significant re-rating of the Company's share price
and enables the Company to invest further into its remaining
portfolio at a material discount to its fundamental asset
value.
"With the sale price of the First Disposal, Hipgnosis Songs Fund
would be realising a 44% total return for shareholders,
highlighting the continuing opportunity of the remaining portfolio
in the future.
"At every step, the Board has been focused on acting in the best
interests of the Company's shareholders. Therefore, noting the
related party aspect of the proposals, we have ensured strong
corporate governance controls and shareholder protections have been
core to the First Disposal, including a Go-Shop Period to ensure
that the Company realises the best available transaction for the
First Disposal Portfolio, as well as these proposals being subject
to shareholder approval alongside the forthcoming Continuation
Resolution.
"We believe the proposals set out today provide the best way to
balance immediate shareholder value with the exciting longer-term
prospects for the Company. Therefore, the Board intends to
unanimously recommend shareholders support these proposals and vote
in favour of the resolutions at the Extraordinary General Meeting
and the 2023 AGM."
Expected Timetable
Transaction announcement 14 September 2023
Latest date for posting of shareholder circular and Notice of EGM and No later than 27 September 2023
AGM
Announcement of the results of the Go-Shop 24 October 2023
Date of AGM and EGM (in the event no Superior Proposal is received No later than 25 October 2023
pursuant to the Go-Shop)
Date of AGM and EGM (in the event a Superior Proposal is received No later than 30 November 2023
pursuant to the Go-Shop)
Expected completion of First Disposal to Hipgnosis Songs Capital T+13 business days from date of AGM and EGM
Analyst call
Andrew Sutch (Chair of Hipgnosis Songs Fund), Merck Mercuriadis
(CEO and Founder of Hipgnosis Song Management) and Chris Helm (CFO
on behalf of Hipgnosis Songs Fund) will be holding a call for
analysts at 1100 BST today.
To register to participate, please contact
hipgnosissongsfund@headlandconsultancy.com .
For further information please contact:
For Hipgnosis Song Management
Merck Mercuriadis
Ben Katovsky
Giles Croot +44 (0)20 4542 1511
Teneo - Financial PR to HSM
James Macey White / Ed Cropley +44 (0) 20 7353 4200
For Hipgnosis Songs Fund
Andrew Sutch
Rufina Pavry (Investor Relations for
Hipgnosis Songs) +44 (0) 20 4542 1530
Headland Consultancy - Financial PR
to Hipgnosis Songs Fund
Susanna Voyle / Del Jones / Charlie
Twigg +44 (0) 20 3805 4822
The Outside Organisation
Alan Edwards/ Nick Caley +44 (0)7711 081843
Fran DeFeo PR +1 917 767 5255
Fran DeFeo frandefeopr@gmail.com
J.P. Morgan Cazenove - Sponsor, Financial
Adviser and Corporate Broker
William Simmonds / Jérémie
Birnbaum (Corporate Finance) +44 (0)203 493 8000
Singer Capital Markets - Corporate
Broker
James Moat / James Maxwell / Angus
Campbell (Corporate Finance)
Alan Geeves / James Waterlow / Sam
Greatrex (Sales) +44 (0)20 7496 3000
RBC Capital Markets - Corporate Broker
Elliot Thomas / Max Avison (Corporate
Finance)
Lisa Tugwell / Natalia Lipecka (Sales) +44 (0)20 7635 4000
For Blackstone +44 (0)7918 360372
Rebecca Flower/ Louis Clark Rebecca.flower@blackstone.com
Louis.clark@blackstone.com
Goldman Sachs International - Financial
Adviser for Hipgnosis Songs Capital
Chris Emmerson / Michael Ryan-Southern +44 (0) 20 7774 9451
FURTHER INFORMATION
Benefits of the proposals
Hipgnosis Songs Fund was launched by Merck Mercuriadis in 2018,
helping to establish music as a new asset class and providing the
investment community with access to extraordinarily successful and
culturally important songs. Since its initial public offering
("IPO"), the Company has built a portfolio of songs unrivalled for
its extraordinary success and cultural importance. This has enabled
the Company to provide shareholders with a stable dividend and an
implied strong capital return based on the value of the Company's
assets.
The core investment case remains unchanged from the Company's
IPO: that the continuing long-term growth of revenue in the music
industry and the ability of the Investment Adviser, to drive
additional value through active Song Management of a portfolio of
iconic songs, will deliver an attractive shareholder return. The
latest Full Year Results were an important validation of this
strategy, delivering the best like-for-like income growth in the
Company's five-year history.
The Board and the Investment Adviser believe the Company's
portfolio will continue to have opportunities for significant
further income and capital growth. Music markets remain buoyant as
they continue to benefit from the increased adoption and
monetisation of paid for music streaming, whilst technological
developments continue to deliver new revenue streams and
legislative changes increase the share of Digital Service Providers
(DSP) revenues going to owners of Songwriter rights. Despite this,
the fundamental value and opportunity of the Company fails to be
reflected in its current share price. Whilst recognising that this
is partly due to economic conditions, as well as music and song
catalogues being a relatively new asset class, the Board and the
Investment Adviser are determined to take action to address the
current share price.
As outlined in the Full Year Results published on 13 July 2023,
the Board and the Investment Adviser have consulted with many of
the Company's largest shareholders. These conversations confirmed
that many shareholders share the view that Hipgnosis Songs Fund
offers a strong long-term growth opportunity and that corporate
activity which would enable a share buy back and partial repayment
of debt should be undertaken.
As a result, the Company proposes to dispose of two portfolios
of music catalogues. These disposals are of the smallest magnitude
possible that would provide the required capital to execute on this
strategy, whilst ensuring that the fundamental investment case for
Hipgnosis Songs Fund remains intact by protecting the strength of
the remaining portfolio.
Firstly, the Company has entered into an agreement, subject to,
amongst other things, shareholder approval, to sell 29 music
catalogues for an aggregate cash consideration of $ 440 million to
Hipgnosis Songs Capital, a partnership between Hipgnosis Song
Management and funds managed and/or advised by Blackstone.
Secondly, it has agreed in principle to sell a portfolio of
non-core songs for a consideration of approximately $25
million.
The prices achieved on these two disposals validate the Board
and the Investment Adviser's view that the realisable value of the
Company's assets, even in the current challenging market
environment, is at a material premium to the value implied by the
current share price.
The disposals will realise significant net proceeds that can be
used to deliver immediate shareholder value by the Company
acquiring its own shares through the establishment of a share
buyback programme of up to $ 180 million (subject to shareholder
approval at the forthcoming 2023 AGM). In addition, the Company
intends to materially reduce its drawings under its RCF by $250
million.
The Board has agreed an amendment to the Investment Advisory
Agreement with the Investment Adviser such that the calculation of
the annual advisory fee payable by the Company to the Investment
Adviser will be amended if the First Disposal is completed to
Hipgnosis Songs Capital. The introduction of new tiers of reduced
fees, calculated by reference to the Company's market
capitalisation, is expected to provide the Company with lower
ongoing operating costs whilst maintaining the Investment Adviser's
alignment with the Company's share price performance.
Background to the First Disposal and relationship with Hipgnosis
Songs Capital
Prior to agreeing the terms of the First Disposal, the Board
evaluated various options that might provide a catalyst to increase
the share price. Considering the strategy of ensuring that the
remaining Company was positioned more strongly than before, the
Company approached Hipgnosis Songs Capital as it believed it would
have an interest in protecting the long-term success of Hipgnosis
Songs Fund given its relationship with Hipgnosis Song
Management.
As a result, the Board have been able to negotiate a transaction
which ensures an improvement in the remaining portfolio but also
delivers what all parties believe reflects a fair market price in
today's market conditions.
In agreeing a deal with Hipgnosis Songs Capital, the Board notes
that the responsibility for management of these Songs will remain
with the Investment Adviser. The Board believes that this will be
welcomed by Songwriters and Artists whose songs remain with
Hipgnosis Songs Fund and, given the Company's ethos as a home that
ensures that Songs are managed effectively and with respect, will
ensure the continued goodwill of all Songwriters and Artists who
have sold their Songs to the Company. This will enable the
Investment Adviser to continue working closely with the Company's
remaining Songwriters and Artists in order to maximise future value
for shareholders through active Song Management
The Investment Adviser to the Company is majority owned by funds
managed and/or advised by Blackstone, which together also own the
majority of interests in Hipgnosis Songs Capital. The proposed sale
of the First Disposal Portfolio therefore constitutes a related
party transaction for the purposes of Listing Rule 11 and,
accordingly, is conditional upon, inter alia, independent
shareholder approval at the Extraordinary General Meeting. The
First Disposal is also conditional on shareholder approval of the
Continuation Resolution at the 2023 AGM.
Given that Hipgnosis Songs Capital and the Investment Adviser
are under common control and, additionally, the Investment Adviser
acts as investment adviser to Hipgnosis Songs Capital, the Board
put in place appropriate governance arrangements and information
barriers to ensure the continued availability to it of a segregated
team of the Investment Adviser to consider and advise on the First
Disposal, none of whom were available to or have any financial
interest in Hipgnosis Songs Capital.
Furthermore, the terms of the First Disposal include a Go-Shop
provision (as set out in the Principal Terms of the First Disposal
below).
Information on the First Disposal
The Company has entered into an agreement, subject to
shareholder approval, to sell 29 catalogues for an aggregate cash
consideration of $ 440 million, reflecting a multiple of 18.3x
historical Net Publisher Share.
The average vintage of these catalogues is 2008, compared to the
Company's existing average vintage of 2003, meaning that the sale
will reduce the Company's exposure to 'younger' catalogues.
The First Disposal Portfolio was designed to protect the
strength of the remaining portfolio, and subject to completion of
the First Disposal the remaining portfolio:
-- Is expected to deliver strong income growth over the medium term;
-- Will have an increased concentration of culturally important
and successful songs, with the Company retaining an interest in 47
of Rolling Stone's 500 Greatest Songs of All Time (existing
portfolio has 52 of these songs) and 85 Spotify Billions Club
(existing portfolio at 12 September 2023 has 106/473); and
-- Continued ownership in seven of its ten largest catalogues.
If the First Disposal to Hipgnosis Songs Capital completes, all
catalogues would continue to be managed by Hipgnosis Song
Management, maintaining the goodwill of Artists and Songwriters and
enabling the Investment Adviser to maximise income by Song
Management of the Company's remaining portfolio.
The First Disposal Portfolio, which is set out in the table
below, accounted for 19% of the Company's Portfolio by value as of
31 March 2023 and 19% of Pro-Forma Annual Revenue ("PFAR") for the
year ended 31 March 2023:
Catalogue Vintage Catalogue Vintage Catalogue Vintage
-------- ---------------- -------- --------------- --------
Poo Bear 2015 Brian Kennedy 2009 Happy Perez 2012
------------------------- -------- ---------------- -------- --------------- --------
Jon Bellion 2007 Brian Kennedy 2010 RedOne 2009
(Writer share)
------------------------- -------- ---------------- -------- --------------- --------
Martin Bresso 2014 Ian Kirkpatrick 2016 LA Reid 1990
------------------------- -------- ---------------- -------- --------------- --------
Kaiser Chiefs 2007 Ari Levine 2012 Steve Robson 2011
------------------------- -------- ---------------- -------- --------------- --------
Ed Drewett 2015 Joel Little 2016 Bob Rock 2003
------------------------- -------- ---------------- -------- --------------- --------
Espionage 2010 Rico Love 2011 Shakira 2012
------------------------- -------- ---------------- -------- --------------- --------
Sean Garrett 2011 Elliot Lurie 1971 Fraser T Smith 2011
------------------------- -------- ---------------- -------- --------------- --------
Terius Gesteelde-Diamant 2010 Lyric Catalogue 1997 Eric Stewart 1977
------------------------- -------- ---------------- -------- --------------- --------
Brian Higgins 2000 Barry Manilow 1989 Tricky Stewart 2009
(Masters)
------------------------- -------- ---------------- -------- --------------- --------
Rick James 1984 Nelly 2002
------------------------- -------- ---------------- -------- --------------- --------
The First Disposal purchase price reflects:
-- A total net return of 44% over a 3 year weighted average life of ownership;
-- A premium of 26% to acquisition price of the First Disposal Portfolio;
-- A premium of 51% to the valuation of the First Disposal
Portfolio implied by the Company's 30-day average market
capitalisation up to 13 September 2023;
-- A discount of 17.5% to the Fair Value of the First Disposal
Portfolio as at 31 March 2023; and
-- A premium of 39% to the IFRS book value as at 31 March 2023,
under which the Company's investments in Catalogues are held at
cost less amortisation and impairment.
On the basis of the terms agreed with Hipgnosis Songs Capital,
the Company expects to make payments of approximately $6.7 million
in corporation tax and $13.9 million in transaction fees. By use of
the Company's tax losses, it has been possible to mitigate the
majority of the Corporation Tax which would otherwise have been
payable on the accounting profit on the sale of these assets. This
announcement does not constitute or describe an updated Operative
NAV of the Company. The Company will next produce an updated
Operative NAV as at its interim reporting date, 30 September 2023,
which will take into consideration, inter alia, the impact of these
proposals.
Principal Terms of the First Disposal
Under the terms of the Master Sale Agreement between the Company
and Hipgnosis Songs Capital, (the "Agreement"), Hipgnosis Songs
Capital will acquire the First Disposal Portfolio following
satisfaction of, or waiver, of the completion conditions for a
total consideration of $ 440 million, payable in cash with at least
80% of the total consideration payable on completion. The remainder
will be paid on a pro rata basis once acknowledgements of letters
of direction in respect of payments for the royalties representing
more than 80% of the anticipated revenue of the First Disposal
Portfolio have been received from relevant counterparties. If such
acknowledgements have not been received within 6 months of the
completion date in respect of any catalogue, the Company will have
the option to repurchase such catalogue on the same terms (provided
that Hipgnosis Songs Capital shall not be required to provide
warranties, representations, covenants or indemnification other
than to the limited extent relating to the period between closing
and the date of repurchase), subject to Hipgnosis Songs Capital's
right to release the holdback amount in lieu of such
repurchase.
As part of the First Disposal, the Company has agreed to assign
to Hipgnosis Songs Capital ownership of all royalties and other
compensation derived from the First Disposal Portfolio, including
any royalties and other compensation received by Hipgnosis Songs
Fund, from 1 January 2023 (the "RTI Date"), whenever they are
received. This amount from 1 January 2023 to date is approximately
$15 .3 million.
The Company will retain responsibility for the payment of any
bonus, earn-out or other contingent payments under the original
acquisition agreements in respect of the First Disposal Portfolio,
up to a cap of $30 million. This liability is currently anticipated
to be approximately $5.5 million.
The First Disposal is conditional upon various conditions,
including the satisfaction (or waiver, where applicable) of the
following:
-- The passing of the Asset Sale Resolution approving the
disposal of the First Disposal to Hipgnosis Songs Capital by
independent shareholders at the Extraordinary General Meeting;
-- The passing of the scheduled Continuation Resolution by shareholders at the 2023 AGM;
-- Any applicable waiting period under the Hart-Scott Rodino
Antitrust Improvements Act of 1976 (as amended) having expired or
terminated;
-- No event or change having occurred that would reasonably be
expected to have a material adverse effect on the revenues to be
received under the First Disposal Portfolio taken as a whole
(subject to certain carve outs customary to a condition of this
nature);
-- Representations and warranties given by the sellers and the
Company and Hipgnosis Songs Capital being true and correct (subject
to certain materiality qualifiers);
-- No governmental body having enacted or issued any law or
order which prohibits or renders the First Disposal illegal and no
action having been commenced by a governmental body that seeks to
suspend or prohibit the First Disposal;
-- A representation and warranties insurance policy being in
full force and effect and the Company having paid all applicable
fees and premiums associated with such policy;
-- The Board of Hipgnosis Songs Fund not terminating the
transaction following receipt of a Superior Proposal (as defined
below); and
-- Certain other matters including the perfection of title to
certain of the First Disposal Assets, the release of encumbrances
over the First Disposal Assets and the provision of certain further
information from the Company to Hipgnosis Songs Capital.
The sale and purchase agreement contains certain warranties and
indemnities given by the Company. Hipgnosis Songs Capital has
procured, at the cost of the Company, a representation and warranty
insurance policy and will use reasonable endeavours to claim
against such insurance policy prior to making a claim against the
Company in respect of warranties and indemnities covered by the
insurance policy.
In addition, the Company has given an indemnity in respect of
any reduction in the value of the rights transferred in the event
that certain companies which have been dissolved are not restored
to the register of companies in order that they can transfer
certain rights.
The Company has the right, for a period of 40 days from the date
of this announcement (the "Go-Shop Period"), to solicit alternative
transactions in relation to the First Disposal Portfolio from third
parties (the "Go-Shop"). If the Company receives and settles the
transaction documents in respect of a Superior Proposal (as defined
below) during the Go-Shop Period, and not to do so would be
inconsistent with the Board's fiduciary and statutory duties
(having consulted with its legal and financial advisers), the Board
may withdraw its recommendation to Shareholders of the First
Disposal and terminate the Agreement, provided that (i) Hipgnosis
Songs Capital has the right, within 5 Business Days of notification
of a Superior Proposal to Hipgnosis Songs Capital, to match the
Superior Proposal; and (ii) the Company will pay to Hipgnosis Songs
Capital a termination fee of $6.6 million (the "Termination Fee").
If Hipgnosis Songs Capital matches the Superior Proposal, such
transaction will be final and binding and the Company will not be
permitted to have any further discussions or negotiations relating
to a Superior Proposal or other alternative transaction with any
person.
For the purposes of the Go-Shop, a "Superior Proposal" is a bona
fide written alternative transaction proposal from an unaffiliated
third party in respect of the First Disposal Assets (or a subset of
the First Disposal Assets) which: (i) if completed would result in
higher aggregate cash net proceeds payable to the Company as a
whole compared to the First Disposal; and (ii) is on terms that the
Board determines in good faith (after consultation with the
Company's legal counsel and financial advisers) to be reasonably
likely to be consummated in accordance with its terms. For the
purposes of the definition of Superior Proposal, the aggregate cash
net proceeds payable to the Company pursuant to the First Disposal
or an alternative transaction shall be determined in accordance
with the following principles:
-- deducting any advisory fees and other third party costs
(including taxes) payable by the Company and its affiliates;
-- deducting the Termination Fee payable to Hipgnosis Songs
Capital from any alternative proposal;
-- any amounts of deferred consideration (other than holdback)
not payable at closing shall be subject to a discount rate at 12.5%
IRR from closing to the date on which such consideration is
payable;
-- any amounts in respect of holdback in relation to an
alternative transaction shall be subject to a discount to such
amount as is reasonably probable to actually be paid to the
Company, as determined by the Board acting reasonably and in good
faith, and in relation to both the First Disposal and an
alternative transaction, a discount at a rate of 12.5% IRR from
closing to the date on which such consideration is payable (as
determined by the Board acting reasonably) shall be applied,
provided that the holdback in respect of the First Disposal shall
not be subject to a discount for probability;
-- any other contingent consideration in an alternative
transaction shall be subject to a discount to such amount as is
reasonably probable to actually be paid to the Company, as
determined by the Board acting reasonably and in good faith, and
further to a discount at a rate of 12.5% IRR from closing to the
date on which such consideration is payable (which date will be as
is agreed in the alternate proposal, absent which it will be as
determined by the Board acting reasonably);
-- the revenue to be accounted for to the purchaser subsequent
to the date on which ownership of all royalties and other
compensation derived from the First Disposal Portfolio is assigned
(being, in respect of the First Disposal, the RTI Date) shall be
deducted;
-- the Company's liabilities to pay contingent bonuses (being,
in relation to the First Disposal, an amount estimated to be $5.5
million) shall be deducted; and
-- no deduction shall be made for any right to hold back any
consideration at closing in respect of certain encumbered
assets.
Save for the Go-Shop, the Company has agreed not to initiate,
assist, solicit, facilitate or encourage the submission of any
inquiries regarding or the making of any proposal or offer that
constitutes, or could reasonably be expected to lead to, any type
of transaction relating to the Company or its securities or any of
the First Disposal Portfolio, or any other assets of the Company
solely to the extent that such a transaction in relation to such
other assets of the Company could reasonably be expected to require
the Company to abandon or terminate, or prejudice its ability to,
consummate the First Disposal or breach the agreements relating to
the First Disposal. The Company will not be required to comply with
such restrictions in relation to a proposal in relation to an offer
for the entire issued share capital of the Company that was not
solicited, initiated or encouraged by or on behalf of Company, to
the extent that compliance would otherwise be inconsistent with the
fiduciary duties of the Board (a "Takeover Proposal"). If the Board
determines in response to a Takeover Proposal or otherwise, that
not to change its recommendation that shareholders vote in favour
of the resolutions to approve the First Disposal at the General
Meeting would be inconsistent with the Board's fiduciary duties
(having consulted with its legal and financial advisers) and
shareholders subsequently do not approve the First Disposal, the
Company will be required to pay the Termination Fee to Hipgnosis
Songs Capital.
The Agreement may be terminated (subject to payment of the
Termination Fee, where relevant) by:
-- mutual written consent of Hipgnosis Songs Capital and the Company;
-- either Hipgnosis Songs Capital or the Company if an order
from a governmental body makes consummation of the First Disposal
illegal or otherwise prohibited;
-- either Hipgnosis Songs Capital or the Company if the
resolution to approve the First Disposal at the Extraordinary
General Meeting or the Continuation Resolution is put to
shareholders and not passed;
-- by the Company in the circumstances described above where a
Superior Proposal has been received; and
-- either Hipgnosis Songs Capital or the Company if the First
Disposal has not been consummated within 180 days of the date of
the Agreement.
In the event a Superior Proposal is received during the Go-Shop
period and Hipgnosis Songs Capital exercises its matching right,
the Board expects it will be necessary to adjourn the Extraordinary
General Meeting and 2023 AGM to a later date to allow for the
posting of a further shareholder circular setting out the
amendments to the terms of the First Disposal. Assuming it is not
terminated in favour of a Superior Proposal, the First Disposal is
expected to complete approximately 13 business days following
satisfaction or waiver of all conditions, which is expected to be
shortly after the date of the EGM and the 2023 AGM.
Related Party Transaction
Funds managed by Blackstone hold the majority of interests in
both Hipgnosis Songs Capital and the Investment Adviser. In
addition, the Investment Adviser acts as investment adviser to both
the Company and Hipgnosis Songs Capital. In light of the Investment
Adviser and Hipgnosis Songs Capital having the same majority
owners, Hipgnosis Songs Capital is a related party of the Company
for the purposes of the Listing Rules. The First Disposal is
therefore a related party transaction under the Listing Rules and
is conditional upon the approval of independent shareholders at the
Extraordinary General Meeting.
The Company intends to publish a circular which will be posted
to Company shareholders no later than 27 September 2023 which will
include the notice convening the Extraordinary General Meeting to
consider and, if thought fit, to pass, the Asset Sale Resolution.
The circular will also contain a notice convening the 2023 AGM for
the same date.
In addition, the Company notes that Mr Mercuriadis and certain
employees of Hipgnosis Song Management have disclosed to the Board
that they hold a minority interest in the share capital of
Hipgnosis Songs Capital.
Hipgnosis Songs Capital is the trading name for all entities
within the partnership between Hipgnosis Song Management and fund
managed and advised by Blackstone.
Recommendation in respect of the First Disposal
The Board considers the proposals described in this
announcement, the passing of the Asset Sale Resolution at the
Extraordinary General Meeting and the passing of the Continuation
Resolution and each of the other resolutions to be proposed at the
2023 AGM to be in the best interests of the Company and its
shareholders taken as a whole. Accordingly, the Board intends to
unanimously recommend that shareholders vote in favour of the Asset
Sale Resolution to be proposed at the Extraordinary General Meeting
and each of the resolutions to be proposed at the 2023 AGM.
Information on the Second Disposal
Following a competitive process, the Board has agreed in
principle, subject to completion of legal documentation and the
consent of the Company's lending banks, to sell a portfolio of
non-core songs for a consideration of approximately $25
million.
The Second Disposal Portfolio songs were acquired as part of
Kobalt Fund One and their eventual sale was part of the Company's
acquisition strategy, as they were considered non-core, as the
Company does not have perpetual ownership rights or the songs
require ongoing accounting and reporting obligations that take up
significant bandwidth which can be better focused on active Song
Management.
Information on the Company's continuing portfolio
Following the First Disposal, the continuing portfolio will
comprise 117 Catalogues with an older average vintage of 2002
(assessed as of 31 March 2023) and will have an increased
concentration of culturally important and successful songs, with
the Company retaining an interest in 47 of Rolling Stone's 500
Greatest Songs of All Time (existing portfolio has 52 of these
songs) and 85 Spotify Billions Club (existing portfolio has
106/473).
KPI Current Portfolio Portfolio post
First Disposal
Number of Catalogues 146 117
------------------------ -----------------------
Average vintage 2003 2002
------------------------ -----------------------
Quality KPIs 106 of 473 of Spotify's 85 of 473 of Spotify's
Billions Club (as Billions Club
at 12 September 47 of Rolling Stone's
2023) The 500 Greatest
52 of Rolling Stone's Songs
The 500 Greatest 8 of YouTube's
Songs 30 Most Viewed
13 of YouTube's Music Videos
30 Most Viewed
Music Videos
------------------------ -----------------------
Rights type Publishing: 86% Publishing: 86%
Recording: 14% Recording: 14%
------------------------ -----------------------
Fair value $2.80 billion $2.27 billion
------------------------ -----------------------
2022 PFAR $130.2 million $106.1 million
------------------------ -----------------------
2022 PFAR by Streaming: 54% Streaming: 51%
income type Synchronisation: Synchronisation:
8% 9%
Performance: 31% Performance: 30%
Other: 7% Other: 10%
------------------------ -----------------------
Following both the First Disposal and Second Disposal, the
Company's annual income per song will increase by over 75% from
$1,990 to $3,500. This smaller focused portfolio of higher earning
songs can be more effectively actively managed to deliver the
strong synch and revenue growth the Company's recent financial
results have proven possible.
Use of Proceeds
The combined net proceeds of the First Disposal and Second
Disposal will be used to establish a share buy back programme
(subject to shareholder approval at the 2023 AGM), reduce drawings
under the RCF and to enhance financial flexibility as follows:
Share buy back programme
Following the completion of the First Disposal, the Board
intends to establish an on-market share buy back programme under
which the Company may apply up to $ 180 million to repurchase the
Company's Ordinary Shares in issue. No maximum price payable for
each Ordinary Share purchased under the share buy back programme
has been determined, however all purchases will be subject to the
maximum price permitted to be paid pursuant to Listing Rule 12.4.1
and within the limits set out in the share buy back authority to be
proposed at the 2023 AGM.
Insofar as the Company's shares continue to trade materially
below the Company's fundamental asset value, share buy backs enable
the Company to invest further into the remaining Portfolio at a
material discount to its fundamental asset value.
The share buy back programme will require the customary approval
of shareholders at the Company's forthcoming AGM , which would
authorise the Company to repurchase up to 14.99% of its issued
share capital . Should this authority be fully utilised, the Board
would seek shareholder approval to renew this authority for further
share buy backs should the Board believe they are in the best
interests of shareholders at that time.
Reduce indebtedness
The Company intends to use part of the net proceeds of the First
Disposal and Second Disposal to repay $ 250 million of amounts
drawn under the Company's RCF with the expectation of reducing the
Company's net indebtedness to below 20% of proforma Operative
NAV.
Given the increase in interest rates, the cost of the Company's
debt has risen significantly since initial draw down, reducing the
financial benefits of leverage to the Company's revenues. As a
result, the Board believes that it is in the best interests of
shareholders to reduce leverage in order to improve security over
the target dividend.
Financial flexibility
The Company intends to use any remaining proceeds to enhance
general financial flexibility.
Amendment to Investment Advisory Agreement
Subject to, and immediately following completion of the First
Disposal to Hipgnosis Songs Capital, the terms of the Investment
Advisory Agreement will be amended such that the calculation of the
annual advisory fee payable by the Company to the Investment
Adviser will be amended to include additional lower tiers.
Following the amendment, the advisory fee will be calculated as
follows:
i. 1 per cent. per annum of the Average Market Capitalisation up
to, and including, GBP250 million, which is unchanged;
ii. 0.90 per cent. per annum of the Average Market
Capitalisation in excess of GBP250 million and up to, and
including, GBP500 million, which is unchanged;
iii. 0.80 per cent. per annum of the Average Market
Capitalisation in excess of GBP500 million and up to, and
including, GBP750 million, which is unchanged;
iv. 0.70 per cent. per annum of the Average Market
Capitalisation in excess of GBP750 million and up to, and
including, GBP1 billion, which is new; and
v. 0.60 per cent. per annum of the Average Market Capitalisation
in excess of GBP1 billion, which is new.
Where Average Market Capitalisation means, in relation to each
month during the relevant Accounting Period where the Advisory Fee
is payable, ("A" multiplied by "B") where:
"A" is the average of the middle market quotations of the
Ordinary Shares for the five day period ending on the last Business
Day of the relevant month in that Accounting Period (adjusted as
appropriate to exclude any dividend where the Ordinary Shares are
quoted ex such dividend at any time during that five day
period);
"B" is weighted average of the number of Ordinary Shares in
issue (excluding any Shares held in treasury) at the end of each
day during the relevant month in that Accounting Period.
As at close of trading on 13 September 2023, being the last
trading day prior to the date of this announcement, the Company's
current market capitalisation was approximately GBP1,125 million,
representing a 40% discount to the Operative NAV of GBP1,873
million as at 31 March 2023. For illustrative purposes, if the
Company's share price were to increase to the level of the
Operative NAV, this proposal would amount to an annualised saving
of GBP2 million.
All other terms of the Investment Advisory Agreement will remain
unchanged .
Recommendation
The Board considers the proposals described in this announcement
and the passing of the Asset Sale Resolution to be proposed at the
Extraordinary General Meeting and the passing of the Continuation
Resolution and each of the other resolutions to be proposed at the
2023 AGM to be in the best interests of the Company and its
shareholders taken as a whole. Accordingly, the Board intends to
recommend unanimously that shareholders vote in favour of the these
resolutions in due course.
The person responsible for making this notification is Andrew
Sutch, Chairman of Hipgnosis Songs Fund Limited.
Notes to Editors
About Hipgnosis Songs Fund:
Hipgnosis Songs Fund, which was founded by Merck Mercuriadis, is
a Guernsey registered investment company established to offer
investors a pure-play exposure to songs and associated musical
intellectual property rights. In March 2020 the Company became a
constituent of the FTSE 250 Index. The Company is recognised as an
investment trust under applicable HMRC regulations.
About Hipgnosis Song Management Limited:
Hipgnosis Song Management Limited is the Investment Adviser for
Hipgnosis Songs Fund Ltd (SONG) and Hipgnosis Songs Capital.
Hipgnosis Song Management was founded by Merck Mercuriadis, former
manager of globally successful recording artists, such as Elton
John, Guns N' Roses, Morrissey, Iron Maiden and Beyoncé, and hit
songwriters such as Diane Warren, Justin Tranter and The-Dream. The
Investment Adviser has assembled an Advisory Board of highly
successful music industry experts which include award winning
members of the artist, songwriter, publishing, legal, financial,
recorded music and music management communities, all with in-depth
knowledge of music publishing. Members of Hipgnosis Song Management
Ltd Advisory Board include Nile Rodgers, The-Dream, Giorgio
Tuinfort, Starrah, David A. Stewart, Poo Bear, Bill Leibowitz, Ian
Montone and Rodney Jerkins.
About Blackstone:
Blackstone is the world's largest alternative asset manager. We
seek to create positive economic impact and long-term value for our
investors, the companies we invest in, and the communities in which
we work. We do this by using extraordinary people and flexible
capital to help companies solve problems. Our $1 trillion in assets
under management include investment vehicles focused on private
equity, real estate, public debt and equity, infrastructure, life
sciences, growth equity, opportunistic, non-investment grade
credit, real assets and secondary funds, all on a global basis.
Further information is available at www.blackstone.com. Follow
@blackstone on LinkedIn, Twitter and Instagram.
Important information relating to financial advisers
J.P. Morgan Securities PLC, which conducts its UK investment
banking business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"),
is authorised in the United Kingdom by the Prudential Regulation
Authority (the "PRA") and regulated by the Financial Conduct
Authority ("FCA") and PRA. J.P. Morgan Cazenove is acting as
sponsor and financial adviser exclusively for the Company and no
one else in connection with the First Disposal and the matters set
out in this announcement and will not regard any other person as
its client in relation to the First Disposal and will not be
responsible to anyone other than the Company for providing the
protections afforded to clients of J.P. Morgan Cazenove or its
affiliates, or for providing advice in relation to the First
Disposal or any other matters referred to in this announcement.
Apart from the responsibilities and liabilities, if any, which may
be imposed on J.P. Morgan Cazenove by FSMA or the regulatory regime
established thereunder or under the regulatory regime of any
jurisdiction where the exclusion of liability under the relevant
regulatory regime would be illegal, void or unenforceable, J.P.
Morgan Cazenove and any person affiliated with it assumes no
responsibility whatsoever for and makes no representation or
warranty express or implied, in relation to the contents of this
announcement, including its accuracy, completeness or verification
or for any other statement made or purported to be made by it, or
on its behalf and nothing contained in this announcement is, or
shall be, relied upon as a promise or representation in this
respect whether as to the past, present or future, in connection
with the Company, or the First Disposal. J.P. Morgan Cazenove and
its respective subsidiaries, branches and affiliates accordingly
disclaims to the fullest extent permitted by law all and any duty,
responsibility and liability whether arising in tort, contract or
otherwise (save as referred to above) which it might otherwise be
found to have in respect of this announcement or any such statement
or otherwise. Any reproduction or distribution of this
announcement, in whole or in part, and any disclosure of its
contents or use of any information contained in this announcement
for any purpose other than considering the terms of the Transaction
is prohibited.
Goldman Sachs International, which is authorised by the
Prudential Regulation Authority and regulated by the Financial
Conduct Authority and the Prudential Regulation Authority in the
United Kingdom, is acting exclusively for Blackstone and no one
else in connection with the matters referred to in this
Announcement and will not be responsible to anyone other than
Blackstone for providing the protections afforded to clients of
Goldman Sachs International or for providing advice in connection
with the matters referred to in this Announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
DISEZLBFXKLXBBV
(END) Dow Jones Newswires
September 14, 2023 02:00 ET (06:00 GMT)
Hipgnosis Songs (LSE:SOND)
過去 株価チャート
から 11 2024 まで 12 2024
Hipgnosis Songs (LSE:SOND)
過去 株価チャート
から 12 2023 まで 12 2024
