Global asset manager The Blackstone Group (NYSE:BX) will acquire rights to a catalogue of songs by best-selling artists such as Colombian superstar Shakira from a UK-based listed fund run by investment adviser Hipgnosis Song Management Ltd.
According to a statement, a swathe of song rights held by the investment adviser’s publicly listed music intellectual property fund will be sold to a private vehicle it owns with the private equity firm.
Hipgnosis Songs Fund Limited (LSE:SONG), a FTSE 250-listed investment company offering investors an opportunity to invest in songs and related rights, and its investment adviser have agreed to sell the song rights to the Hipgnosis Songs Capital vehicle for US$465 million.
The deal will involve the sale of a portfolio of 29 music catalogues of newer songs with an average vintage year of 2008, compared to 2003 in the existing portfolio, for US$440 million in cash, reflecting an 18.3x multiple of the historical net publisher share.
The purchase price represents a 51% premium to the valuation implied by the company’s average market cap for 30 days through 13 September. This transaction is expected to achieve a total net return of 44% over a three-year weighted average life of ownership, the investment manager said.
Hipgnosis has also agreed to sell a portfolio of non-core songs held by the fund, which reported 12.1% like-for-like growth in income for the financial year ending on 31 March, for approximately US$25 million to Kobalt Fund One.
It said it would use net proceeds from the divestments to carry out a share buyback programme of up to US$180m and to repay US$250 million of draw-downs under its revolving credit facility.
The proposals are subject to shareholder approval at an extraordinary general meeting and annual general meeting expected to take place by 25 October. The sale of the first lot of catalogues is expected to be completed within thirteen business days of the shareholder meetings.
Merck Mercuriadis, founder of the fund and chief executive of Hipgnosis Song Management, said: “Earlier this year we initiated consultations with shareholders, in contemplation of the Continuation Vote and our concerns that the true value of our iconic songs was not being reflected in our share price. It was clear that shareholders shared our belief in the continuing long-term opportunity of Hipgnosis Songs Fund and wished to see a significant share buyback programme and reduction of our leverage in order to deliver a re-rating in the share price.”