Concord, the US music rights group that bought Round Hill Music Royalty last September, has done it again, swooping on Hipgnosis Songs Fund (SONG ) with a $1.4bn recommended cash offer.

The agreed price of $1.16 (93.2p) per share offers investors a 32% premium to last night’s close and is pitched at a 4.3% premium above the fund’s operative net asset value, which was slashed by a third last month.

The shares jumped 30%, or 21p, to a seven-month high of 91.4p. This is well below their 129p peak in November 2021 but analysts said it looked like the best deal shareholders could expect, having seen their stock trade on a wide discount for two-and-a-half years after the market grew disillusioned with the way the fund was run.

SONG chair Robert Naylor, who also chaired the Round Hill fund, urged shareholders to accept the offer and for Blackstone-backed Hipgnosis Song Management (HSM) to negotiate an end to its fund management contract.

This follows a series of disputes between the fund’s board and HSM’s founder Merck Mercuriadis over valuations and the threat of legal action from Mercuriadis’ former business partners. 

‘The acquisition represents an attractive opportunity for our shareholders to immediately realise their holding at a premium, mitigating the risks we see ahead to achieving a material improvement in the share price,’ said Naylor who took charge in November after a shareholder rebellion ousted its former board in October.

Concord, the trading name of Alchemy Copyrights in the US, is backed by the deep pockets of Apollo Capital Management, the New York-based alternative investments group.

Naylor said the SONG board was confident that Concord ‘is the right owner to take on the Hipgnosis catalogue and manage it in the interests of composers and performers.’

Leading investors holding 23.5% of the shares agree and have given irrevocable undertakings to back the deal. These include Asset Value Investors, the activist manager of AVI Global (AGT) that successfully challenged the previous board, CCLA Investment Management, Schroders, J O Hambro Capital Management, Madison Avenue Partners, Gresham House, Hawksmoor and Premier Miton.

Naylor said the shareholder payout would increase by $25m if HSM agreed to terminate its management contract.

He added: ‘We would now encourage Hipgnosis Song Management, the company’s investment adviser and Blackstone, which is HSM’s majority owner, through funds they manage and/or advise, to agree an orderly termination of the investment advisory agreement.

‘This would enable the payment of a larger consideration under the agreed transaction with Concord and bring to an end a period of uncertainty for all Hipgnosis stakeholders.’

Winterflood analyst Shavar Halberstadt said triggering termination would give HSM six months to decide whether to exercise its contractual right to buy the SONG portfolio at the higher of the Concord bid, market value or portfolio fair value.  

‘We believe Merck Mercuriadis will be keen to keep hold of the portfolio he has painstakingly put together, but whether sufficient capital will be available to HSM, from Blackstone or otherwise, is unknown at this stage.

‘On a per share basis, we do not expect material upside from a prospective HSM counter-bid, as the contract clause would seem to only require them to match Concord’s offer,’ he said.

Gavin Trodd at Deutsche Numis said: ‘Ultimately, we believe that this becomes Concord/Apollo’s issue if they have bought the company, whilst shareholders will have been cashed out at a price they are comfortable with.

Stifel analyst Sachin Saggar said it was a ‘fair price’ that would ensure investors from SONG’s flotation nearly six years ago would roughly break even, with dividends included.

‘Hence, while the stock has been intensive from a resource perspective, from a return perspective it has been ok,’ he said.