Mark Kleinman: A remix at Hipgnosis and accountancy drama

Mark Kleinman is Sky News’ City Editor and is the man who gets the City talking in his weekly City A.M. column. This week he tackles what’s next at Hipgnosis, a transparency farrago at the accountants’ trade body and a move for a Treasury spinner

Remix brings change of tune to Hipgnosis

A melancholic ballad contemplating a relationship breakdown or an upbeat celebration of future love? It’s hard to know which tone of musical expression Blackstone might choose to reflect its feelings towards Hipgnosis Songs Fund right now.

Its recent actions suggest that it carries an unrequited affection for the London-listed company. Its move last weekend to raise its bid, after confirmation of my story that it had already tabled three proposals to acquire HSF, betrays an emotional attachment that won’t easily fade.

That’s understandable. HSF owns the rights to the catalogues of Shakira, Neil Young and the Red Hot Chili Peppers, and combining HSF with its own privately held music assets would create a more scaleable player in an industry which is already consolidating into a small number of big players.

Blackstone’s out-of-hours announcement that it had trumped Concord Music’s 93.2p-a-share bid, and that it would defend its contractual rights with vigour, represented an unusually aggressive public expression of frustration from one of the world’s biggest private equity firms.

Concord last night pitched up with an improved 101p a share offer – so we look set for a long fight.

It is a battle which speaks to the unnecessarily labyrinthine nature of many corporate deals has the makings of a legal epic, unless cooler heads prevail. Concord Music walking away would ultimately achieve the same objective, although its advisers’ remarks about its much larger scale suggest it is not to be intimidated by Blackstone’s drumbeat.

Blackstone, which owns 51% of HSF’s investment adviser, Hipgnosis Song Management (HSM), has the right to buy SONG’s assets for the same price as any rival bidder. But its improved offer last weekend is not sufficient to release the irrevocable commitments secured by Concord Music from nearly a quarter of HSF’s shareholders.

Tensions over the SONG assets – exacerbated by an independent valuation suggesting they were worth a fifth less than HSM had concluded last autumn – have themselves proved a drag on the London-listed company’s shares.

It has become too familiar a refrain (much like the endlessly repeated chorus of one of its hits), but it is hard to see how these differences can easily be resolved in the public arena. Hipgnosis shareholders are relying on Blackstone to deliver the closest thing they are likely to get to a sweet lullaby.

Mystery surrounds accountants’ audit splinter body

The annual report of the Institute of Chartered Accountants in England and Wales would be many people’s idea of the perfect insomnia cure. This year’s makes more interesting reading than most. 

On page 126 of the report, it discloses “employee discontinuation expenses” of £216,000 in the last financial year. These, it adds, were “payable to Michael Izza”, its former chief executive, who retired at the end of the year.

The lack of transparency from a professional body supposedly committed to the principle of it is puzzling

Yet those hoping for more transparency from the global professional body for chartered accountants will be sorely disappointed – there is no explanation of why the sum was paid, nor how it was calculated.

Similar mystery surrounds the purpose behind a new body that the ICAEW is in talks with the big four accountancy firms to establish focused on audit quality at public interest entities (PIEs). 

One industry source dismissed the idea as “a new lobbying group by the back door” – a claim vehemently denied by the ICAEW. 

“Representatives from the ICAEW, the Institute of Chartered Accountants of Scotland and a range of Public Interest Entity audit firms are currently in the early stages of exploring the merits of establishing a standalone organisation to drive best practice and share learnings across the PIE audit market, akin to the Center for Audit Quality in the US,” a spokeswoman told me. 

“As discussions around the formation and functionality of such a group remain ongoing, it would be inappropriate to comment further at this time.”

Again, the lack of transparency from a professional body supposedly committed to the principle of it is puzzling. Critics have suggested that the ICAEW’s retention of fines imposed on the audit firms it oversees represents a clear conflict of interest. The progress of this new body, which presumably would be funded from those reserves, will be one to keep a close eye on. 

Treasury advisor departs – but not for calmer waters

Out of the frying pan and into the fire? During five years in government, Cameron Brown proved he was nothing if not a survivor.

A special advisor to Kwasi Kwarteng during his stint as business secretary, Brown moved across to the Treasury with his boss in the summer of 2022. 

BIRMINGHAM, ENGLAND – OCTOBER 03: Chancellor of the Exchequer Kwasi Kwarteng accompanied by his special advisor, Cameron Brown, attends the second day of the annual Conservative Party conference on October 03, 2022 in Birmingham, England. The Chancellor confirmed this morning the government would not be proceeding with the recently announced cut to the 45pence tax rate for top earners. This year the Conservative Party Conference will be looking at “Getting Britain Moving” with more jobs and higher salaries. (Photo by Ian Forsyth/Getty Images)

One ill-fated mini-Budget later and both the chancellor and the prime minister, Liz Truss, had fallen on their swords. Brown, however, remained in place under Jeremy Hunt, Kwarteng’s successor.

I now hear that Brown has accepted a role as corporate affairs director at Pennon Group, the FTSE-250 water company.

It may not be Thames Water, the sector’s most prominent basket case and nationalisation candidate, but as the owner of South West Water, Pennon is also facing the prospect of a noisy few months ahead.

The water industry regulator, Ofwat, will publish its draft price determinations for the industry on June 12. Pennon may not be staring down the barrel in the same manner as its balance sheet-stretched peers, but defending a big water company in the run-up to the election will be an interesting challenge, even for Brown.

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