LONDON (Celebrityaccess) — British music investor Hipgnosis Songs Fund announced a new plan that would provide a $25 million dollar incentive to potential bidders on the investment fund.
According to Hipgnosis, the board has proposed to create a payment of a fee of up to 20 million pounds (about $25 million) to investors making an offer that is intended to serve as “cost protection” for prospective offers.
The new incentive comes after the fund’s investors overwhelming voted to reject the fund’s plans to sell its stake in 29 music catalogs to Hipgnosis Songs Capital, a partnership between private equity giant Blackstone and Hipgnosis Song Management, the fund’s investment advisor.
In announcing the decision to add cost protections for potential buyers, Hipgnosis confirmed that a clause in its deal with its investment advisor that created an apparent conflict of interest, was a key point of concern for shareholders and a possible deal breaker for potential investors.
“The Newly Constituted Board has undertaken a substantial investor consultation exercise, having engaged with shareholders holding more than 60% of the Company’s shares. One of the key themes of these consultations was shareholders’ concern around the Investment Adviser’s “Call Option”, which gives the Investment Adviser the right to purchase the portfolio upon termination of the Investment Advisory Agreement,” stated Robert Naylor, the recently appointed chair of Hipgnosis’ board.
“Shareholders have told the Board that the Call Option constitutes a material conflict of interest for the Investment Adviser and acts as a significant deterrent to any third-party potential offerors who might seek to acquire the Company or its assets. The Board believes that the Investment Adviser’s Call Option therefore depresses the potential value of the Company by limiting certain possible opportunities for Shareholder value creation,” Naylor continued.
Merck Mercuriadis, the founder of Hipgnosis Songs Fund, is also the founder of investment advisor Hipgnosis Song Management.
