Hipgnosis Songs Fund Ltd - investor in music rights - Will call extraordinary general meeting of shareholders to approve a proposal to compensate potential bidders for the fund's assets. The board wants to be able pay a fee of up to GBP20 million to prospective buyers offering terms recommendable to shareholders by the board. The fee is intended to protect bidders against due diligence and acquisition costs so that they are "not deterred from seeking to engage with company" over a possible offer.
The concern that bidders may be deterred is due to the call option over the fund's assets that is held by its investment adviser, Hipgnosis Song Management Ltd, giving the adviser the right to buy the fund's portfolio upon termination of its investment advisory agreement with the fund. The latest move by the fund's reconstituted board follows a shareholder revolt over an agreement, since rejected, to sell a portfolio of 29 music catalogues for USD440 million in cash to Hipgnosis Songs Capital, a joint venture between Hipgnosis Song Management and private equity firm Blackstone Inc.
"Investors in Hipgnosis Songs Fund overwhelmingly voted for change when they rejected the continuation of the company and the proposed sale of certain music assets," explains Chair Robert Naylor. "From our shareholder consultation, core to the requirement for change is addressing the call option...This not only acts as a structural conflict between the interests of our shareholders and the investment adviser, but also creates a significant deterrent to potential bidders for the company's assets thereby depressing the value of the company."
Current stock price: 70.17 pence
12-month change: down 18%
By Tom Waite, Alliance News editor
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Hipgnosis Song. (SONG)