Recommended cash acquisition of Hipgnosis Songs Fund by Lyra Bidco

29 April 2024 - Press release

RECOMMENDED CASH ACQUISITION

of

HIPGNOSIS SONGS FUND LIMITED

by

LYRA BIDCO LIMITED

(a newly-formed company indirectly wholly-owned by investment funds advised by affiliates of Blackstone Inc.)

to be implemented by means of a takeover offer for the purposes of section 337 of the Companies (Guernsey) Law, 2008 (as amended)

 

Summary

·    The boards of directors of Lyra Bidco Limited ("Bidco") and Hipgnosis Songs Fund Limited ("Hipgnosis") are pleased to announce that they have reached agreement on the terms and conditions of a recommended cash acquisition by Bidco of the entire issued, and to be issued, ordinary share capital of Hipgnosis.

·    It is intended that the Acquisition will be implemented by way of a takeover offer for the purposes of section 337 of the Companies Law. Bidco reserves the right to elect to implement the Acquisition by way of a Scheme as an alternative to the Offer, subject to the Panel's consent and the terms of the Cooperation Agreement.

·    Under the terms of the Acquisition, each Hipgnosis Shareholder will be entitled to receive:

for each Hipgnosis Share: $1.30 in cash

·    The GBP equivalent value of the Acquisition Price based on the Announcement Exchange Rate, being 104 pence, represents a premium of approximately:

·    4.0 per cent. to the implied offer price of the Concord Revised Offer;

·    48.1 per cent. to the Closing Price of 71 pence per Hipgnosis Share on 17 April 2024 (being the last Business Day before the commencement of the Offer Period);

·    53.6 per cent. to the volume-weighted average price of 68 pence per Hipgnosis Share for the one-month period ended 17 April 2024 (being the last Business Day before the commencement of the Offer Period);

·    58.1 per cent. to the volume-weighted average price of 66 pence per Hipgnosis Share for the three-month period ended 17 April 2024 (being the last Business Day before the commencement of the Offer Period); and

·    16.9 per cent. to Hipgnosis' Adjusted 30 September 2023 Operative NAV per Hipgnosis Share of $1.11.

·    The Acquisition values Hipgnosis' entire issued, and to be issued, ordinary share capital at approximately $1,572 million (which is equivalent to £1,262 million based on the Announcement Exchange Rate).

·    The terms of the Acquisition represent an attractive premium for Hipgnosis Shareholders over the terms of the Concord Revised Offer and accordingly the Hipgnosis Shareholders are urged to take no action in respect of the Concord Revised Offer.

·    Bidco will procure that a facility will be made available under which Hipgnosis Shareholders will be able to elect (subject to the terms and conditions of the facility) to receive the cash consideration in Sterling (after deduction of any transaction or dealing costs associated with the conversion) at the applicable market exchange rate on the latest practicable date for fixing such rate prior to the relevant payment date. Further details of this facility and the election by Hipgnosis Shareholders wishing to receive their cash consideration in Sterling will be set out in the Offer Document and the Form of Election. On the basis of the Announcement Exchange Rate, the cash consideration implies an equivalent value of 104 pence per Hipgnosis Share. For any Hipgnosis Shareholder electing to be paid their cash consideration in Sterling, the amount per Hipgnosis Share received may, depending on the prevailing exchange rate, result in a payment below or above 104 pence per Hipgnosis Share.

·    If, on or after the date of this announcement and prior to completion of the Acquisition, any dividend and/or other distribution is announced, declared, made or paid or becomes payable in respect of the Hipgnosis Shares with a record date prior to completion of the Acquisition, Bidco reserves the right to reduce the consideration payable under the terms of the Acquisition for the Hipgnosis Shares by an amount up to the aggregate amount of such dividend and/or distribution, in which case any reference in this announcement to the consideration payable under the terms of the Acquisition will be deemed to be a reference to the consideration as so reduced. Any exercise by Bidco of its rights referred to in this paragraph shall be the subject of an announcement and, for the avoidance of doubt, shall not be regarded as constituting any revision or variation of the terms of the Offer or the Acquisition. In such circumstances, Hipgnosis Shareholders would be entitled to retain any such dividend or distribution declared, made or paid.

Recommendation

·    In light of the terms of the Acquisition as compared to the Concord Revised Offer, the Hipgnosis Directors, who have been so advised by Singer Capital Markets as to the financial terms of the Acquisition, unanimously consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Hipgnosis Directors, Singer Capital Markets has taken into account the commercial assessments of the Hipgnosis Directors. Singer Capital Markets is providing independent financial advice to the Hipgnosis Directors for the purposes of Rule 3 of the Takeover Code.

·    Accordingly, the Hipgnosis Directors intend to recommend unanimously that Hipgnosis Shareholders should accept or procure the acceptance of the Offer, or (in the event that the Acquisition is implemented by way of a Scheme), to vote in favour of the Scheme at the requisite Court Meeting and the Resolutions at a General Meeting of Hipgnosis Shareholders.

·    Given their intended recommendation of the terms of the Acquisition, the Hipgnosis Directors have decided unanimously to withdraw their recommendation of the Concord Revised Offer.

Background to and reasons for the Acquisition

·    Blackstone's history of investments covers a wide range of sectors and business structures that all have in common a focus to build and grow the businesses in which it invests. Blackstone has a particularly strong focus on the media and entertainment sectors, covering music rights as well as the broader universe of asset-backed strategies. Among its investments within the media and entertainment sectors, through its portfolio company Hipgnosis Songs Assets, managed by Hipgnosis Song Management Limited ("HSM" or the "Investment Adviser") which is majority owned by Blackstone, Blackstone owns music rights catalogues from leading artists and songwriters. Blackstone's other investments in the space include SESAC, the US performance rights society and Candle Media.

·    Blackstone continues to invest thematically in content across the wider entertainment industry. Blackstone has closely tracked the performance of Hipgnosis and has been a long term admirer of the music rights catalogues owned by Hipgnosis. Blackstone will seek to further enhance the value of the acquired rights in collaboration with the songwriters, artists and producers who entrusted Hipgnosis to safeguard their legacy.

·    Blackstone has worked collaboratively with the Hipgnosis Board to ensure that its offer represents a fair and reasonable outcome for all shareholders.

Background to and reasons for the recommendation

·    On 18 April 2024, the boards of Hipgnosis and Concord announced that they had reached agreement on the terms of a recommended cash offer pursuant to which Concord would acquire the entire issued and to be issued share capital of Hipgnosis for $1.16 per Hipgnosis Share (with a further contingent consideration of up to $0.020 per Hipgnosis Share).

·    On 20 April 2024, Blackstone announced a possible offer for the entire issued and to be issued share capital of Hipgnosis at a price of $1.24 per Hipgnosis Share.

·    On 24 April 2024, the boards of Hipgnosis and Concord announced that they had reached agreement on the terms and conditions of an increased recommended cash offer pursuant to which Concord would acquire the entire issued and to be issued share capital of Hipgnosis at a price of $1.25 per Hipgnosis Share (the "Concord Revised Offer").

·    Under the terms of the Acquisition from Bidco announced today, each Hipgnosis shareholder would receive $1.30 per Hipgnosis Share, representing a premium of $0.05 per Hipgnosis Share (4.0 per cent.) compared to the Concord Revised Offer. The Hipgnosis Board has concluded, after careful consideration, that the Acquisition represents a superior offer for Hipgnosis Shareholders as compared with the Concord Revised Offer.

·    Accordingly, the Hipgnosis Board has decided to withdraw its recommendation for the Concord Revised Offer and intends to unanimously recommend that Hipgnosis Shareholders accept or procure the acceptance of the Acquisition, or (in the event that the Acquisition is implemented by way of a Scheme), to vote in favour of the Scheme at the requisite Court Meeting and the Resolutions at a General Meeting of Hipgnosis Shareholders.

Information relating to Bidco and Blackstone

·    Bidco is a private limited company incorporated under the laws of England and Wales on 25 April 2024, whose registered office is at 40 Berkeley Square, London, W1J 5AL, United Kingdom with registered number 15680043. Bidco is a newly-formed company indirectly wholly-owned by investment funds advised by affiliates of Blackstone. Bidco was formed for the purposes of the Acquisition and has not traded since its date of incorporation, nor has it entered into any obligations other than in connection with the Acquisition.

·    Blackstone is one of the world's leading investment firms. Blackstone seeks to create positive economic impact and long-term value for our investors, the companies we invest in and the communities in which we work. Blackstone does this by using extraordinary people and flexible capital to help companies solve problems. Blackstone's $1 trillion in assets under management as at 31 December 2023 includes investment vehicles focused on private equity, real estate, public debt and equity, life sciences, growth equity, opportunistic, non-investment grade credit, real assets and secondary funds, all on a global basis. Further information is available at www.blackstone.com.

Information relating to Hipgnosis

·    Hipgnosis was launched in 2018 to offer investors a pure-play exposure to music royalties and their associated intellectual property rights with a focus on building a diversified portfolio, acquiring catalogues that are built around proven hit songs by some of the most talented and important songwriters globally.

·    Since launch, Hipgnosis has built a portfolio currently comprising 138 catalogues with more than 40,000 songs, containing copyright and income streams derived from compositions performed by some of the top artists of the last 50 years. Hipgnosis' portfolio is diversified across genres, artists, vintages and right types.

·    Hipgnosis is a non-cellular Guernsey company registered with the GFSC as a closed-ended collective investment scheme whose ordinary shares are admitted to the Premium Listing Segment of the FCA's Official List and admitted to trading on the Main Market of the London Stock Exchange. It is a self-managed AIF under the EU AIFM Directive and the UK AIFMD.

Timetable and conditions

·    It is intended that the Acquisition will be implemented by way of a takeover offer for the purposes of section 337 of the Companies Law (although Bidco reserves the right to elect to implement the Acquisition by way of a Scheme, subject to the Panel's consent and the terms of the Cooperation Agreement).

·    The Offer will be conditional on, among other things, valid acceptances being received (and not validly withdrawn) by not later than 1.00 p.m. (London time) on the unconditional date (or such later time(s) and/or date(s) as Bidco may, with the consent of the Panel, decide) in respect of such number of Hipgnosis Shares as shall, when aggregated with any Hipgnosis Shares acquired or unconditionally agreed to be acquired (whether pursuant to the Offer or otherwise) by Bidco, represent Hipgnosis Shares carrying not less than 55 per cent. of the voting rights then exercisable at a general meeting of Hipgnosis Shareholders (or such lower percentage as Bidco may decide), provided that Bidco shall hold or have acquired or agreed to acquire (whether pursuant to the Offer or otherwise), directly or indirectly, Hipgnosis Shares carrying in aggregate more than 50 per cent. of the voting rights then normally exercisable at a general meeting of Hipgnosis (the "Acceptance Condition"). Unless the Panel agrees otherwise, the Acceptance Condition shall only be capable of being satisfied when all other Conditions have been satisfied or waived.

·    The Acquisition is subject to the satisfaction or, where applicable, waiver of the Conditions. The Conditions to the Acquisition are set out in full in Appendix 1 to this announcement along with certain other terms; and the full terms and conditions will be provided in the Offer Document.

·    It is expected that the Offer Document, containing further information about the Acquisition and specifying the actions to be taken by Hipgnosis Shareholders in respect of the Offer, will be published (with the accompanying form of acceptance) as soon as practicable and in any event within 28 days of this announcement. "Day 60" of the Takeover Code timetable will be the day falling 60 days after publication of the Offer Document (or such other date as may be determined by Bidco with the agreement of the Panel to be the last date for fulfilment of the Acceptance Condition).

·    The Acquisition is currently expected to complete during the third quarter of 2024, subject to the satisfaction or (where applicable) waiver of the Conditions.  An expected timetable of key events relating to the Acquisition will be set out in the Offer Document.

·    Commenting on this announcement, Robert Naylor, the Chair of Hipgnosis, said:

"The Board is pleased to unanimously recommend this US$1.6 billion Offer for Hipgnosis from Blackstone. Since we started our strategic review, we have been clearly focused on looking at all the options to deliver shareholder value. We are delighted that, following competitive interests in acquiring Hipgnosis, our investors now have a chance to immediately realise their holding at an increased premium."

·    Commenting on this announcement, Qasim Abbas, Senior Managing Director of Blackstone, said:

"Our offer price, which has been unanimously recommended by the Board, represents a significant premium to the unaffected share price and allows shareholders to realise immediate and attractive value for their shareholding. The offer is the result of extensive discussion and negotiations with the Board and provides shareholders the certainty of cash today.

Blackstone is a long-term investor with deep experience of investing across the media and entertainment sectors, including in music rights. The breadth of the Blackstone platform, combined with our operational expertise, will support and enhance the value of the acquired rights."

This summary should be read in conjunction with, and is subject to, the following announcement and the Appendices. The conditions to, and certain further terms of, the Acquisition are set out in Appendix 1. The bases and sources for certain financial information contained in this announcement are set out in Appendix 2. Certain definitions and terms used in this announcement are set out in Appendix 3.