MBW Review is where we aim our microscope toward some of the biggest happenings in the music world lately. This time, we’re getting into the nitty-gritty of Hipgnosis’s plan to combine Blackstone’s billions alongside the existing, publicly circulating Hipgnosis Songbox. MBW review is backed by Instrumental.
Hipgnosis Song Fund (HSF) He had a good few days. The UK-listed company saw its share price reach an all-time high on Friday (November 19), giving it a market value of around US$2.1 billion.
This achievement was reached in the same week that the investment bank Stifel (whose criticism of HSF in the past has made headlines in the financial media) has quietly upgraded the fund’s stock from “negative” to “hold.”
(So far, Stifel’s pessimism about Hipgnosis has been a bit of a bête noire for the music company among a much rosier outlook than other analysts; so the shift in its attitude is an important step.)
More good news delivered to HSF shareholders of the UK listed company Capital Markets Day Last Wednesday (November 17) by Hipgnosis Founder and CEO, Merck Mercuriadis.
For starters, Mercuriadis confirmed that a large portion of the $215 million from the Hipgnosis Song Fund raised this summer (via a stock offering) was spent as a result on acquiring a catalog of hot red pepperCovering a large number of hit songs over the decades.
Mercuriadis also disclosed that proceeds from this $215 million increase were additionally used to purchase, among other assets, the writer’s and the publisher’s stake (plus major equity income) of Ann Wilson’s stake in heart Catalog plus songs from country star Rhett Akins, and the already announced acquisition of a catalog from Kristen McPhee.
Despite this, there were important questions Mercuriadis must answer when it comes to Hipgnosis’ the new A pile of money – the $1 billion that Blackstone invested last month in a separate private Hipgnosis fund: capital hypnosis songs.
Before we get into these important questions, a reminder of five important pieces of context:
- Hipgnosis Songs Capital (HSC) It is a new special fund created by Mercuriadis in partnership with Black stoneBlackstone has committed an initial investment of $1 billion to purchase the copyright. This initial $1 billion investment could rise in the future to several billion dollars;
- Plus a billion dollars Black stone commit HSC, the financial giant Moreover Invest an unlimited amount of money in Hipgnosis song management (formerly family music) – the entity that not only concludes the acquisitions of Hipgnosis, but is also responsible for maximizing returns from synchronization licensing, catalog marketing, etc.;
- as, Hipgnosis song management Become an investment advisor/”song management” partner for both Hypnosis song box And capital hypnosis songs. That is, it now spends money on deals on behalf of both companies, working on their catalogs;
- Having raised $215 million in June/July this year, Hypnosis song box pledged to its investors that it would not raise more capital in the public markets until at least the second quarter of 2022;
- However, when Merck Mercuriadis announced Hipgnosis Songs Capital with Blackstone last month, he said Blackstone’s $1 billion investment (who owns MBW) was “just the beginning of a long-term partnership between Blackstone and Hipgnosis.” Also includes co-investment[s] with SONG“.
This pretty much brings us up to speed.
The obvious query here is twofold:
- If the public money (Hypnosis song box(It has now exhausted its investment capital and will not raise more cash until the second quarter of 2022, how will it implement “joint investments” with the Blackstone-backed private fund)capital hypnosis songs)?
- Regardless, why Black stone The fund acquiesces to have a separate financing powerhouse in future musical asset acquisitions?
All of this was illustrated by Merck Mercuriadis and Board of Hipgnosis at Capital Markets Day last week – and while it’s deep in the weeds, it’s important to the future of multibillion dollar music rights, and where/how you’ll own them in the coming years.
To help us clarify, another neatly numbered list is likely to be worthwhile. On Capital Markets Day last week, Merck Mercuriadis confirmed/revealed:
- Hypnosis song box (General Fund) will certainly not raise new capital until the summer or fall of next year, as agreed with the shareholders;
- Hipgnosis song management (Investment advisor for both funds) currently has 2 billion pounds (about 2.7 billion US dollars) In deals in the pipeline – deals that, if completed before next summer, will be fully acquired by capital hypnosis songs (Special Fund) using Blackstone funds;
- However, once Hypnosis song box (General Fund) is able to raise more cash in 2022, as will its board of directors You have the opportunity to preview – and buy – any deals executed by the Blackstone Fund via Hipgnosis song management;
- Here’s the crucial point: Black stone and the capital hypnosis songs The Fund agreed that, as a continuing rule, if Hypnosis song box would like to participate in investing in any of these deals, HSF will gain 20% of acquired rights, while HSC You will get the rest 80%;
- clearly, Hipgnosis Song Box The ability to invest with Blackstone / Hypnosis Capital Songs Depends on the previous company collecting the money required to do so.
interrogated by James Mowat Singer Capital Markets, Merck Mercuriadis Explained in the Hipgnosis Songbox [aka “SONG”] Capital Markets Day How’s this 80/20 The policy will work in practice.
“First of all, first of all, [Hipgnosis Songs Fund] “Both Blackstone and Blackstone will be able to see all that is in the making,” Mercuriadis said. “It was very important for us to make sure we had a policy that would allow SONG shareholders to be a part of everything.
“Certainly what we didn’t want was for there to be any disappointment, when it happened in SONG [the required] Money to invest, for the SONG contributor to turn around and say, “Wait, why didn’t we get to it [deal X or Y]? ‘
“This way, with the policy we came up with, SONG – when it has the money – has the opportunity to co-invest in literally everything.”
“This way, with the policy we came up with, SONG – when that happens [the required] Money – has the opportunity to co-invest in literally everything. ”
Merck Mercoradis, Hypnosis
Mercuriadis noted during Capital Markets Day that Hipgnosis was hoping for this Black stone It will invest “many times” its initial investment of $1 billion in capital hypnosis songs in the next years.
He added that there would be no change in the acquisition strategy going forward with Hipgnosis, regardless of whether the money spent was from its private or public fund.
Music Industry Veteran Paul Burger, a non-executive director of the Hipgnosis Song Fund, explained: “The [HSF] The Board of Directors had a number of concerns on behalf of the shareholders to ensure this in the future, [HSF] Not only would shareholders be hurt as a result of the Blackstone deal, but quite the opposite – [that we] Can take advantage of opportunities that may arise that otherwise would not have existed [HSF’s spending] capacity based on our limited liquid resources.”
“We really feel [reassured] who – which [Hipgnosis Songs Fund] “The shareholders have the opportunity to participate in any transaction where we have the resources,” Berger said, adding, “Knowing that there is a fixed percentage [agreement with Blackstone]…rather than going into a market environment saying, “I want 10% of this catalog, or 60% of this catalog,” I think we’ve extracted all of that out of the equation by coming up with the 80/20 rule.
Burger emphasized that there is no “pull and tick” clause between HSF and Hipgnosis Songs Capital, i.e. no clause that would force HSF to sell its stake at HSC’s request in the future.
Burger further explained that the Hipgnosis Song Fund is keen to “take advantage” of Blackstone’s additional investment in Hipgnosis Song Management; Hopefully, as HSM increases in size and scope, this will in turn “increase revenue” for the Hipgnosis Song Fund catalog – which has already been spent more than US$2 billion on.
Mercuriadis told Hipgnosis Songs Fund shareholders that they expect the private fund/Blackstone to fly alone on a number of deals in the coming months, until HSF begins raising its new money in the summer of next year at the earliest.
“If we take a £2 billion pipeline we are working our way through at the moment,” Mercuriadis said, “there is really nothing in the pipeline. [there] We wouldn’t recommend SONG and Blackstone if it [public] The money was there.”
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