The private equity titan Blackstone is this weekend drawing up plans for a £1.2bn takeover bid for the owner of songs performed by Blondie, the Kaiser Chiefs and the Red Hot Chili Peppers.
Sky News can exclusively reveal that Blackstone has already tabled several offers to buy Hipgnosis Songs Fund (HSF), the London-listed music rights investment company.
The first was worth 82p-a-share, insiders said, while another was pitched at 88p and the most recent was worth marginally less than a 93.2p-a-share bid for HSF unveiled on Thursday from Concord Chorus, a music and theatrical rights company.
Sources said that Blackstone, which is being advised by investment bankers at Jefferies, was now considering making a higher offer for HSF, which trades on the London Stock Exchange under the ticker SONG.
One added that Blackstone had been “surprised” by the announcement this week that SONG’s board had recommended the bid from Concord Chorus – which is backed by Apollo Global Management – given its own ongoing conversations about an offer.
The person also questioned HSF’s decision to recommend a proposal “at the start of a bidding war, without attempting to extract greater value for shareholders”.
A source close to HSF disputed that characterisation.
A takeover of the company would crystallise value for Hipgnosis shareholders, who saw the shares slump to a record low in March of about 56p in the wake of a reduction in the value of its portfolio and a suspension of dividend payments.
HSF’s troubles have been played out for months in the public arena, culminating last October in a decision by shareholders to reject its board’s goal of securing their backing for its continuation.
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The company has been mired in bitter recriminations and legal arguments over its performance and governance.
A review conducted by Shot Tower Capital, a specialist adviser, concluded in March that SONG’s assets were worth a fifth less than Hipgnosis Song Management (HSM), its investment adviser, had reported last September.
Blackstone is already deeply immersed in HSF’s future because it owns a 51% stake in HSM, which has a contract to manage the SONG assets.
If HSM agreed to terminate the contract between them, it would release up to $25m for HSF although analysts say it is unclear why HSM would willingly forego any cash it believes is owed to it.
One of the obstacles facing Blackstone in any new offer lies in the fact that the SONG board has received irrevocable acceptances of the Concord Chorus bid from over 23% of shareholders.
Those only fall away in the event that a rival bidder tables an offer worth at least 10% more – in this case over 102p-a-share.
However, HSM also has a call option in its management agreement with HSF which allows it to acquire the portfolio of music assets even if Concord Chorus is successful, at the same price it pays.
The call option is understood to evaporate if the management contract is terminated for cause.
The legal disputes involving the companies, which insiders have left the situation finely balanced, with a possible compromise agreement between them also being floated by investors.
A source close to Blackstone said it was very confident in its contractual position.
Artists whose catalogues are owned by the listed company also include Neil Young and Mark Ronson.
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The remainder of HSM is owned by Merck Mercuriadis, a former manager of Beyonce and Sir Elton John, who launched Hipgnosis in 2018 with the aim of turning music royalties into a mainstream asset class.
He struck a $1bn deal three years later for Blackstone to provide firepower for buying music rights and managing catalogues.
Since then, some of the world’s most prominent financiers, including the likes of Apollo and KKR, have developed a similar appetite to buy into music assets.
In February, Mr Mercuriadis moved from becoming CEO of HSM to the chairman’s role, with Ben Katovsky taking over as CEO.
Sources emphasised on Saturday that Blackstone’s interest in acquiring HSF was on a standalone basis and was independent of Mr Mercuriadis.
That stance is likely to raise questions about the buyout giant’s ongoing relationship with the Hipgnosis founder.
Blackstone is one of the world’s most powerful investors, with hundreds of billions of dollars of ‘dry powder’ available for investment.
When its alliance with Mr Mercuriadis was unveiled two-and-a-half years ago, Qasim Abbas, a senior managing director in Blackstone’s tactical opportunities team, said: “This partnership underscores the long-term, sustainable value we see in creative content across the wider entertainment industry.
“The music industry has been at the forefront of the fast-growing streaming economy and is unlocking new ways of consuming content.”
Shares in HSF closed on Friday at 91.9p, giving it a market capitalisation of just over £1.1bn and marginally below the level of the recommended offer from Concord Chorus.
On Saturday, Blackstone and HSF both declined to comment.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
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Disruption is expected to continue at the retailer until the end of this month.
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Mickey Carroll in May answered why M&S cyber attack was so bad.
The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
A New York-listed company with a valuation of more than $21bn is to snap up Space NK, the British high street beauty chain.
Sky News has learnt that Ulta Beauty, which operates close to 1,500 stores, is on the verge of a deal to buy Space NK from existing owner Manzanita Capital.
Ulta Beauty is understood to have registered an acquisition vehicle at Companies House in recent weeks.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
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Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The sale of Royal Mail was approved in December
The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.