TIDMSONG
RNS Number : 0787A
Hipgnosis Songs Fund Limited
18 January 2024
This announcement contains inside information for the purposes
of UK Market Abuse Regulation
18 January 2024
LEI: 213800XJIPNDVKXMOC11
Hipgnosis Songs Fund Limited ("Hipgnosis" or the "Company")
Proposed Change to Articles of the Company
The Board of Hipgnosis Songs Fund announces that it will publish
a circular (the "Circular") to propose that the Articles of the
Company are amended, by way of a special resolution (the
"Resolution"), to enshrine the payment of a fee, at the Board's
discretion, of up to GBP20 million (in aggregate) by the Company to
any prospective bidder(s) who approaches the Board seeking to make
an acquisition of the assets of the Company on terms recommendable
by the Board to shareholders.
Introduction and Background to the Proposal
At the Company's Annual General Meeting convened on 26 October
2023, shareholders of the Company ("Shareholders") overwhelmingly
voted against the Company continuing its business as a closed-ended
investment company.
Shareholders also overwhelmingly voted against the proposed sale
of a portfolio of 29 music catalogues for aggregate cash
consideration of $440 million to Hipgnosis Songs Capital ("HSC") at
the Extraordinary General Meeting held on the same day. HSC is the
trading name of Hipgnosis SC IV (Delaware) L.P., a limited
partnership represented by its general partner which is indirectly
controlled by Blackstone Inc. and advised by Hipgnosis Song
Management Limited ("Hipgnosis Song Management"). Hipgnosis Song
Management is also the Company's investment adviser ("Investment
Adviser").
Following these shareholder votes, the composition of the Board
of directors of the Company underwent significant change to form a
Newly Constituted Board. The Newly Constituted Board is conducting
a strategic review, announced on 26 October 2023, looking at all
options to be considered for the future of the Company, with the
aim of maximising value for shareholders.
The Newly Constituted Board has undertaken a substantial
investor consultation exercise, having engaged with shareholders
holding more than 60% of the Company's shares. One of the key
themes of these consultations was shareholders' concern around the
Investment Adviser's "Call Option", which gives the Investment
Adviser the right to purchase the portfolio upon termination of the
Investment Advisory Agreement. Shareholders have told the Board
that the Call Option constitutes a material conflict of interest
for the Investment Adviser and acts as a significant deterrent to
any third-party potential offerors who might seek to acquire the
Company or its assets. The Board believes that the Investment
Adviser's Call Option therefore depresses the potential value of
the Company by limiting certain possible opportunities for
Shareholder value creation.
The Board therefore proposes that the Articles of the Company
are amended, by way of a special resolution, to:
-- enshrine the payment of a fee of up to GBP20 million (in
aggregate) by the Company, at the Board's discretion, to any
prospective offeror(s) who may approach the Board seeking to make
an acquisition of one or more of its subsidiaries which own the
majority of the Company's music assets, and/or all or some of the
Company's assets, on terms recommendable by the Board to
Shareholders; and
-- the extent permissible by UK Takeover Code issued by the
Panel on Takeovers and Mergers, as amended from time to time,
authorise the payment(s) and/or reimbursement(s) by the Company of
up to a maximum aggregate amount of GBP20 million to bona fide
prospective offeror(s) for the entire issued share capital of the
Company on terms recommendable by the Board to Shareholders
(together, the "Proposal").
The Newly Constituted Board considers that the Proposal will
provide significant protection to prospective offerors against
their due diligence and acquisition costs, up to a maximum of GBP20
million (in aggregate), to ensure that they are not deterred from
seeking to engage with the Company regarding a recommendable offer
for the Company's assets as a result of the terms of the Investment
Adviser's Call Option.
The Newly Constituted Board therefore considers that the
Proposal will provide greater potential opportunities to maximise
value for Shareholders. Specifically in relation to the Proposal,
the Newly Constituted Board has consulted with several of the
Company's largest shareholders, holding in aggregate more than 35%
of the issued share capital and all whom have indicated their
support for the Proposal. The Strategic Review is ongoing, and the
Board is not actively seeking one or more potential offers for the
Company.
Notice of the Extraordinary General Meeting
A circular, containing further details of the Proposal and the
Call Option and a notice convening the Extraordinary General
Meeting in order to pass the Resolution is expected to be
dispatched to Shareholders in due course.
The Circular will set out the background to and reasons for the
Proposal and the reasons why the Directors, having consulted its
financial adviser and broker Singer Capital Markets, consider the
Proposal to be in the best interests of the Company, having regard
to the interests of its Shareholders as a whole, and recommend that
Shareholders vote in favour of the Resolution as they intend to do
in respect of their shareholdings. A further announcement will be
published in due course.
Robert Naylor, Chairman of Hipgnosis Songs Fund Limited,
said:
"Investors in Hipgnosis Songs Fund overwhelmingly voted for
change when they rejected the continuation of the Company and the
proposed sale of certain music assets.
"From our shareholder consultation, core to the requirement for
change is addressing the Call Option held by our Investment
Adviser, Hipgnosis Songs Management. This not only acts as a
structural conflict between the interests of our shareholders and
the Investment Adviser, but also creates a significant deterrent to
potential bidders for the Company's assets thereby depressing the
value of the Company.
"It is against this backdrop that we are proposing to change our
Articles to allow potential bidders to put forward their proposals
for the Company's assets, with significant cost protection, if
supported by a Board recommendation to shareholders. We are
pleased, having discussed this proposal with many of our largest
shareholders, that they are supportive of the Board's efforts to
unlock the full value from the Company's assets. The newly
constituted board believes it is essential to try to level the
playing field so shareholder value can be maximised ."
The person responsible for making this notification is Robert
Naylor, Chairman of Hipgnosis Songs Fund Limited.
For further information please contact:
Hipgnosis Songs Fund
Robert Naylor
Via Singer Capital Markets +44 (0) 20 7496 3000
Singer Capital Markets - Corporate Broker
James Moat / Alaina Wong / Angus Campbell
(Corporate Finance)
Alan Geeves / James Waterlow / Sam Greatrex
(Sales) +44 (0) 20 7496 3000
Headland Consultancy - Financial PR
Susanna Voyle / Charlie Twigg +44 (0) 20 3805 4822
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