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Blackstone is set to sweeten its offer for Hipgnosis as part of a revised bid for the music rights owner that will make completing the deal easier.
The US private equity firm is working on plans to change its takeover offer to a so-called ‘scheme of arrangement’, according to two people familiar with the situation, and will increase its bid to secure support for the move.
Under a scheme of arrangement, the deal will need approval from 75 per cent of the company’s voting shareholders, but it then becomes binding across all investors, regardless of whether they voted in favour of it or not.
In this way taking full control of a company without the need to “squeeze out” dissenting shareholders under a formal takeover offer usually becomes quicker. Hedge funds have piled into the Hipgnosis stock since the start of the takeover battle in April, seeking to benefit from the increases in share price, which could complicate the takeover.
However, Blackstone will in effect need to submit a new form of offer for the company just weeks after fighting off rival Concord in a fiercely fought takeover battle and finally securing the board’s backing for its bid after several separate offers.
The new offer also needs approval from the UK’s Takeover Panel. An announcement of the deal could come as early as Monday, the people said.
Blackstone is set to raise its offer to $1.31, an increase of a cent from its previous offer of $1.30, according to two people close to the situation.
The Blackstone offer will value Hipgnosis, which owns a large portfolio of music rights that includes the Red Hot Chili Peppers and Shakira, at almost $1.6bn. The extra money will be an unexpected but welcome boost for shareholders that had once appeared set for heavy losses from their stakes in the group.
The offer of $1.31 represents a 17 per cent premium to the company’s adjusted net asset value. The music rights company owns a portfolio of 138 catalogues with more than 40,000 songs, which offer a yield based on income from streaming and other uses.
The move is the latest complication in a protracted takeover battle for Hipgnosis, whose future looked difficult only months ago following repeated cuts to the value of its portfolio as interest rates rose, and questions over its governance and debt levels.
Shareholders last year voted against the continuance of the company, sparking a strategic review by a new board and ultimately a sales process.
However, those close to the talks said the deal should proceed smoothly once the scheme of arrangement is secured.
Blackstone already owns a majority stake in Hipgnosis’s management company, Hipgnosis Song Management (HSM), which collects fees for overseeing the listed Hipgnosis fund.
Blackstone’s investment adviser had an option, exercisable at any point in time during the six-month period following the termination of its contract, to purchase the entire portfolio of songs.
Blackstone declined to comment on Sunday evening.
