The board of Hipgnosis Songs Fund has approved a takeover bid by Concord, an American independent music company.
Concord, which is controlled by Alchemy Copyrights, has proposed to buy Hipgnosis in a deal valued at $1.4bn (£1.1bn). Hipgnosis owns the rights to songs by the world’s top artists, including Britney Spears, Justin Bieber and Shakira.
Hipgnosis shareholders will receive $1.16 (93.2p) in cash for each share, much higher than recent share prices, with a chance for an extra consideration of up to $25m (£20m) if certain conditions are met.
The London-listed stock closed yesterday at 70.80p. The stock has fallen nearly 18 per cent over the past year.
Robert Naylor, chairman of Hipgnosis, said: “The board is pleased to announce and unanimously recommend this $1.4bn Offer for Hipgnosis from Concord. The acquisition represents an attractive opportunity for our shareholders to immediately realise their holding at a premium, mitigating the risks we see ahead to achieving a material improvement in the share price.
“At the same time, the board is confident that Concord, one of the world’s leading independent music companies, is the right owner to take on the Hipgnosis catalogue and manage it in the interests of composers and performers.
“We would now encourage Hipgnosis Song Management, the company’s investment adviser and Blackstone, which is HSM’s majority owner, through funds they manage and/or advise, to agree an orderly termination of the Investment Advisory Agreement.
“This would enable the payment of a larger consideration under the agreed transaction with Concord and bring to an end a period of uncertainty for all Hipgnosis stakeholders,” he added.
The deal, which will happen through a court-approved arrangement, needs approval from Hipgnosis shareholders and regulatory bodies.
The company’s share price has struggled recently due to an ongoing battle over its valuation. In March, an independent valuer found that inflated growth figures and overvaluation of the music catalogues led Hipgnosis to lose hundreds of millions over the last few years.
Bob Valentine, chief executive of Concord said: “We believe we are offering a fair price for Hipgnosis’ catalogues and music assets, giving its shareholders the opportunity to realise their investment at a significant premium to the prevailing share price in cash.
“We believe we can integrate Hipgnosis’ catalogues into our wider portfolio of 1.2 million songs in a way that will deliver benefits for composers, performers and all our stakeholders,” he added.
Last year, Los Angeles-based Alchemy Copyrights also offered to buy US company Round Hill Music for $469m (£376m), causing its shares to blast up nearly 65 per cent.