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Hipgnosis splashes cash on Big Deal to boost song book

14 September 2020

Hipgnosis Songs Fund has bought music publisher Big Deal Media, the first time it has purchased another company, and added Chrissie Hynde to its roster of artists.

Hipgnosis (SONG ), the £773m closed-ended song royalty fund, has turbocharged its portfolio of songs with the acquisition of Big Deal Music, and also added rock frontwoman Chrissie Hynde’s back catalogue.

The Guernsey listed fund, which was set up by Merck Mercuriadis, former Beyonce manager and Sanctuary record label boss in 2018, has splashed some of the £236m it raised in a C-share issue in July on its first large-scale company acquisition. The cost of the deal - which is part of the £1bn pipeline Hipgnosis said it had developed - was not disclosed but the equity component of it has been valued at £21.2m.

Big Deal Music, which owns copyright interests in over 4,400 songs, including One Direction’s ‘Story of My Life’ and Shawn Mendes’ ‘Stitches’, will be rebranded as Hipgnosis Songs Group and also adds a ‘full service US music platform’ to Hipgnosis’ roster. 

Mercuriadis said Big Deal backs songwriters at an early stage and then ‘works hard to put them in rooms with the best established songwriters and artists in the world’ to deliver hit songs. 

He said the platform company delivers ‘song creation, song administration, and song management’, skills which will now be transferred to the whole of the Hipgnosis catalogue of songs. 

‘I have always been clear that I believe we have an important responsibility with regard to our culturally important songs and the gold standard songwriters that have entrusted them to us,’ said Mercuriadis.

‘We shall now take what is the broken traditional music publishing model and replace it with our concept of song management, where we nurture, love, and get the most out of our songs by putting the most into them.’ 

The purchase of Big Deal, which has operations in Los Angeles, New York, and Nashville, is expected to give ‘greater control’ of third-party administration costs, deliver faster collection of royalty income, and develop relationships with streaming services such as Spotify that will ‘allow Hipgnosis to leverage its portfolio to obtain better rates’. 

Christopher Brown, investment companies analyst at JPMorgan Cazenove, Hipgnosis’s corporate broker, said the deal ‘transforms’ the alternative income fund and that the new in-house expertise would enable it ‘to deliver on its promise of actively managing its portfolio by placing songs and collecting revenue more efficiently’. 

‘Hipgnosis is one of the most attractive investments in not only the investment companies sector but also the wider equity market,’ he said, adding that it is a ‘sign of confidence’ that the dividend target has been increased to a yield of 4.3%.  

Brown said, even at a premium of 9%, the shares ‘represent outstanding value’ given the potential for market growth and active song management.

As well as the bumper acquisition of Big Deal Music, Hipgnosis has carried on with its tried-and-tested strategy of purchasing individual back catalogues, most recently that of The Pretenders’ frontwoman and main songwriter Chrissie Hynde (pictured). 

Hynde, who formed the band in 1978, penned hits such as ‘Don’t Get Me Wrong’, ‘I’ll Stand By You’, and ‘Brass in Pocket’, the band’s first UK number one in 1980. She continues to tour with the band.

Hipgnosis acquired 100% of Hynde’s music publishing catalogue of 164 songs, including publishing and writer’s share from The Pretenders and her other projects. 

Mercuriadis said the deal was ‘very personal’ as Hynde is ‘one of my favourite songwriters of all time and The Pretenders are one of my favourite bands’, and he turned vegetarian and then vegan 35 years ago due to long-time animal rights activist Hynde’s influence. 

‘She has this powerful effect on her audience which is why they remain so devoted and committed after 40 years and why new generations of fans are constantly attracted to her,’ he said. 

Investment company news brought to you by Citywire Financial Publishers Limited.

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