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Merck Mercuriadis, adviser to Hipgnosis Songs Fund, has offered to drop a controversial clause giving him the right to buy the group’s music portfolio as he battles to stay on at the investment trust he founded.
Hipgnosis Songs Fund is a UK-listed investment trust that owns the rights to thousands of songs, including the catalogue of hits by punk band Blondie.
It is advised by Hipgnosis Song Management, run by Mercuriadis, which founded the listed fund in 2018.
Shareholders in October voted down a further five-year mandate for the investment trust, forcing its board to review options for its future, because of concerns over its management and strategy.
On Thursday, Hipgnosis Songs Fund made an unusual offer for bidders to come forward for its music catalogue by promising to cover costs up to £20mn for any recommended offer.
Shareholders in the Hipgnosis investment trust have told its board they were concerned about a “call” option that gives Hipgnosis Song Management the right to buy the music portfolio if its contract is ended at a certain price.
Shareholders argue that this clause deters any potential bidder, which the offer of cash is designed to offset.
Hipgnosis Song Management made alternative proposals earlier this week in effect saying that this clause would be dropped if Mercuriadis is able to stay on as manager in a multiyear contract, according to people familiar with the matter.
The moves are the latest in an ongoing saga as the board of Hipgnosis Songs Fund looks to overhaul the trust, which made acquisitions during the low-interest-rate era but has suffered a sharp fall in the share price over the past two years.
The UK-listed music rights owner has asked its investors to back their proposal to pay a fee to any prospective bidder with a deal recommendable by the board.
Under the call option, the company’s investment adviser, which is helmed by Mercuriadis, can buy the assets at the higher of three figures — the market capitalisation, the offer price or fair value.
With a share price half the current fair value estimate of the assets, it is possible that any counter offer from the investment manager would be higher than any potential bid.
Even so, the company’s board sees the offer of a fee of as much as £20mn as a means of making the deal less risky for those wanting to carry out expensive due diligence.
The company’s music catalogue has already started to attract interest from leading music labels, according to people close to the groups, although none has yet made an offer.
Hipgnosis Songs Fund and Hipgnosis Song Management declined to comment on Mercuriadis’s proposal.
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