The bidding war between Blackstone and Concord over the acquisition of Hipgnosis Songs Fund may be over, but Blackstone faces a new obstacle in its quest to take over the UK-listed music rights company: Hedge fund shareholders of Hipgnosis who want a higher price.
According to an analysis by the Financial Times, these hedge funds own more than enough of Hipgnosis to block a vote approving Blackstone’s acquisition, which requires approval from 75% of voting shares to pass.
Earlier this month, Blackstone raised its bid for Hipgnosis, upping its previous offer of $1.30 per share to $1.31 in cash. That brings its bid for Hipgnosis to $1.584 billion, per Blackstone’s calculations, up from the $1.572 billion offer it made in late April, a number high enough to make Concord throw in the towel on its own bid for Hipgnosis.
Blackstone also reorganized its acquisition offer as a “scheme of arrangement.” Under UK law, a major change to a corporate structure can be carried out through such schemes of arrangement under court order, but only with the approval of shareholders representing at least 75% of shares.
For Blackstone, the advantage of such an arrangement is that it can ensure that current shareholders won’t remain owners of a minority stake after the acquisition, FT reported.
In a regulatory filing this week, Blackstone made it clear it doesn’t plan to bend to these hedge funds’ demands for an even higher bid.
The offer on the table is “final and will not be increased,” Blackstone said.
However, it did carve out one exception: Lyra Bidco, the official entity making the offer on behalf of Blackstone, “reserves the right to increase the amount of the offer price… in the event of a scheme lapse, if there is an announcement… of an offer or a possible offer for Hipgnosis by a third party offeror or potential offeror.”
In other words, the hedge funds aren’t going to get any more out of Blackstone than what the private equity firm has offered, unless Concord (or someone else) jumps back in with a higher offer.
According to FT, hedge funds that own shares in Hipgnosis include TIG, which has become Hipgnosis’ largest shareholder with a 14% stake; Glazer Capital, with around 8%; Kryger Capital, with 6.6%; and Sand Grove Capital Management, with around 6%.
The battle for control of Hipgnosis Songs Fund and its stack of music rights potentially worth $2.2 billion began when indie music company Concord made a $1.40 billion offer for Hipgnosis Songs Funds’ assets in April.
Not long after, Blackstone, an investment fund with more than $1 trillion in assets under management, jumped in with a $1.5 billion offer of its own.
Concord came back with a counteroffer of its own, bidding $1.5115 billion for Higpnosis, slightly less than 1% more than Blackstone’s bid.
Blackstone shot back with a $1.572 billion ($1.30 per share) bid in late April, which got the approval of Higpnosis’ board.
This was enough to convince Concord to back out of the bidding war.
Nevertheless, in early June, Blackstone sweetened that offer ever so slightly, raising it to the current $1.584 billion, evidently in an effort to ensure that it will have total control of Hipgnosis shares
So will Blackstone’s declaration of a “final” offer cause the hedge funds to back down? Will the hedge funds’ bid for a bigger payout scupper the deal?
The drama over Hipgnosis Songs Fund’s future isn’t over just yet.Music Business Worldwide