Concord ends bidding war for Hipgnosis Songs Fund, Blackstone poised to take over

Blackstone looked poised to take over Hipgnosis Songs Fund (HSF) on Thursday after Concord Music said it would not outbid the global investment firm.

Concord surprised Blackstone and the wider market on April 18 when it announced it had the unanimous backing of HSF directors to take over the troubled music rights fund for £0.93 ($1.14), a bid that valued the company at 1.402 billion dollars.

Concord once raised its offer to $1.25 a share, but Blackstone stole board approval when it made a superior offer that valued the company at $1.6 billion on April 29. Concord said Thursday that its latest offer was final and would not increase substantially by bowing out of the bidding war.

While Blackstone's offer still needs approval from 75% of the Hipgnosis Songs Fund's shares, it was the most likely buyer for shareholders looking for an edge from the 5-year-old fund's turbulent last six months.

The Hipgnosis Songs Fund's assets, which include stakes in the catalogs of the Red Hot Chili Peppers, Neil Young, Journey, Lindsey Buckingham, Blondie and others, are prized by investors and rival music companies, but the fund has been plagued by management and accounting errors that overstated both its revenue and the valuation of its portfolio, according to a due diligence report by investment bank Shot Tower Capital released on March 28. HSF's share price plummeted after its board canceled the dividend and reduced the value of its portfolio.

Blackstone already has two other entities under the Hipgnosis brand — music asset private equity fund Hipgnosis Songs Capital (HSC) and investment advisor Hipgnosis Song Management (HSM) led by Merck Mercuriadis.

An option on HSM's contract essentially makes Hipgnosis Songs Fund Blackstone lose. The option, which dates back to the fund's initial public offering in July 2018, stipulates that the Blackstone-owned entity could match any takeover bid for the fund's assets, a clause intended to give investors artists trust that the rights and royalties of their songs would not often change hands.

HSF's board will meet in June and a shareholder vote to approve Blackstone's offer is expected, with a deal finally completed in mid-July.