The board of Hipgnosis has said it would recommend a bid from private equity giant Blackstone to its shareholders if the company makes a firm offer.
On Saturday, Blackstone revealed it had kicked off a bidding war for the music-focused investment trust by making a rival offer to the one put by Concord Music.
Concord had valued Hipgnosis Song Fund at $1.4bn (£1.1bn) in its bid last week, but Blackstone floated an offer seven per cent higher.
Blackstone is the majority owner of the trust’s investment adviser Hipgnosis Song Management (HSM), and had made four offers behind the scenes to Hipgnosis, with the most recent one being the highest.
Hipgnosis’ board said it has reviewed the latest proposal with its financial adviser, Singer Capital Markets, and would “be minded to recommend to its shareholders” if Blackstone announced a firm intention to make an offer.
This would go against the board’s previous decision, after it chose to unanimously back the original bid from Concord.
Therefore, until Blackstone makes a firm offer, Hipgnosis said it continued to back the takeover bid from Concord, stating that it had not currently been “withdrawn, qualified or modified”.
“The board and its advisers will continue to provide Blackstone and its advisers access to confirmatory due diligence, to enable Blackstone to announce a firm intention to make an offer, as soon as possible,” it added.
Both sides of the bidding war will now wait for the UK Takeover Panel to set a date by which Blackstone must make a firm offer for the trust.
When Blackstone floated its offer at the weekend, it also acknowledged a clause in the contract between Hipgnosis and its adviser that on the termination of its investment advisory agreement (IAA), it has a six month window to purchase the trust’s entire portfolio of songs, at the same price offered by Concord.
“Blackstone and its portfolio company HSM, having taken extensive legal advice, remain confident in the enforceability of the option,” said the firm.
“Blackstone is seeking to find a positive outcome for all shareholders at a fair and reasonable value; however, Blackstone and HSM value the contractual protections under the IAA and will vigorously defend HSM’s rights pursuant to the option if required to do so.”
However, this call option has been reported to no longer be valid if the management contract is terminated for cause.
Nevertheless, this option may be weighing on the Hipgnosis board, making it more likely to accept the Blackstone bid to avoid a protracted legal battle over whether it can refuse to sell its portfolio to the company.
