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The Megamusic Megamerger

Hipgnosis Songs Fund, the pioneering British company that ignited the music industry’s frenzied rush for catalog acquisitions with its purchases of song rights from icons like Justin Bieber, Neil Young, and Shakira, has announced a tentative deal to be acquired by Concord, a prominent independent music company. The proposed acquisition, valued at $1.4 billion, could potentially transform both entities and further alter the landscape of the music business.

Listed on the London Stock Exchange, Hipgnosis has seen its share price tumble significantly, a downturn that prompted its board, which approved the deal unanimously, to consider the sale. The agreement, however, is not yet final, as it faces a potential obstacle from an affiliated company holding a contractual option to purchase the catalog at a predetermined price.

Robert Naylor, Hipgnosis’ chairman, stated, “The acquisition represents an attractive opportunity for our shareholders to immediately realize their holding at a premium, mitigating the risks we see ahead to achieving a material improvement in the share price.” Concord’s offer of $1.16 per share is a 32 percent premium on Hipgnosis’ last closing price but still reflects a nearly 28 percent decline from the company’s peak valuation in November 2021.

Founded by Merck Mercuriadis, a former music executive with an extensive background managing stars like Beyoncé and Elton John, Hipgnosis made its public debut in 2018. The company promoted the value of music royalties as being “more valuable than gold or oil,” a proposition that resonated with both investors and artists, leading to about $2.2 billion in catalog investments. These acquisitions once valued the company’s catalog at an estimated $2.6 billion in September, though a recent revaluation has lowered this figure to just under $2 billion, citing overpayments and overstated revenues.

Bob Valentine, CEO of Concord, with its vast holdings that include legendary labels like Stax and Craft, expressed optimism about integrating Hipgnosis’ collection of 1.2 million songs into its portfolio. Valentine highlighted the potential benefits for “composers, performers, and all our stakeholders,” suggesting that the acquisition could create synergies that enhance value across their combined catalogs.

This acquisition would not only end one of the most tumultuous periods in Hipgnosis’ history but could also mark a significant consolidation in the independent music sector, affecting how music rights are managed and monetized. Concord’s takeover could enable more strategic management of the vast song libraries, potentially driving greater returns for artists and investors alike.

The outcome of this deal could hinge on the resolution of the call option held by Hipgnosis Song Management, which also involves oversight from the investment giant Blackstone. The resolution of this option could pave the way for a smoother acquisition process, or alternatively, introduce further complexities if exercised.

As the music industry continues to evolve with these substantial financial maneuvers, the impact of such acquisitions will likely reverberate through the market, affecting everything from how music is licensed to how artists are compensated. The deal, if concluded, will not only close a chapter for Hipgnosis but also potentially set new standards in the strategic management of music rights.