Concord
Indie music giant Concord said on Friday it has acquired parts of the music publishing and recorded music catalog of reggaetón superstar Daddy Yankee.
The deal encompasses certain rights to Daddy Yankee songs including “Con Calma,” his rights as a featured artist on “Despacito” and “Gasolina,” whose “unforgettable hook” and “revolutionary” beat landed it in Billboard’s Top 50 Latin songs of all time. The deal also includes certain name, image and likeness rights, according to a press release from Concord.
Concord declined to comment on price. However, earlier this month in a KBRA report about Concord’s asset backed security, the bond rating agency wrote that Concord acquired the catalog of “a highly successful Latin Music artist and songwriter” in 2024 and that those works were valued at $217.3 million.
Trending on Billboard
How much does Daddy Yankee stand to benefit from the deal? The Latin hitmaker, whose Barrio Fino was the first reggaetón album to debut at No. 1 on Billboard’s Top Latin Albums chart in 2004, sold this portion of his catalog several years ago to a fund that asked not to be named. That fund sold the assets to Concord, so the artist will not get a cut of this sale of his works.
But Billboard reported in July that Daddy Yankee still owns part of his publishing catalog, which is administered worldwide by Sony Music Publishing and partly by Spirit Music in the United States. From 2021 to 2023, Daddy Yankee’s works averaged 375,333 album consumption units, with 346,000 album consumption units so far this year, according to Luminate.
CRAZY FOR CATALOGS
Catalogs are an important revenue driver for Concord, and the company’s CEO Bob Valentine said this week that through various marketing, distribution, film and commercial licensing agreements, the company regularly generates 5-15% more revenue from the assets it acquires than the prior owner.
“We can then create value for the artist, for our shareholders, for our debt holders, for our pension holders—all the people who are somehow invested in that effort,” Valentine said, speaking at the Mondo.NYC conference in Brooklyn. “The two things we talk about [with artists] is how are we going to protect your legacy and how are we going to make it live.”
Concord’s ownership — the Michigan State Retirement Systems own 93% — and how it has recently financed acquisitions, through asset backed securities, make it a uniquely long-term focused catalog acquirer that aims to hold these assets for 30-40 years.
The company also employs around 750 people worldwide, and it operates a label, music publishing division and one of the most significant theatrical companies with the catalogs of Rodgers & Hammerstein Theatricals, The Andrew Lloyd Webber Collection, and more.
However in some circles, Concord is better known for the 1.3 million songs it has acquired, including some of its biggest money-making assets like John Fogerty’s Credence Clearwater Revival publishing catalog and Phil Collins’ rights to Genesis songs.
Speaking at the Mondo.NYC conference, Concord described these works “as music and genres that fit so perfectly with an era that to own them … means you own that segment of someone’s nostalgia.” Anyone who ever makes a movie about the Vietnam War will likely call Concord to license CCR’s songs, Valentine says.
But Concord also owns the Latin label Fania Records and Mexican record label Musart Records, and several of the Latin artists it represents through its publishing division were nominated for Latin Grammy’s this year: Daymé Arocena’s nomination for Song of the Year for “A Fuego Lento,” writers Julian Bernal and Sammy Soso’s nomination for Best Pop Vocal Album for Orquídeas performed by Kali Uchis, and Camilo Lara’s nomination for Best Cumbia/Vallenato Album for Se Agradece performed by Los Ángeles Azules.
CALL HIM DADDY
Daddy Yankee’s catalog will be managed out of Concord’s recently expanded Miami office, the company said.
“Since he burst onto the scene, Daddy Yankee has been at the forefront of not only reggaeton, but pop music generally,” Valentine said in a statement. “We were incredibly excited by this opportunity to work alongside Daddy Yankee to continue building on his remarkable legacy and significance. His real and lasting cultural impact is clear, and Concord is thrilled to be a part of his story.”
Concord financed the acquisition of Daddy Yankee’s works by issuing a third round of asset backed security notes that were priced this week that bring its total ABS to $2.6 billion. Daddy Yankee’s catalog will be contributed to the ABS’s collateral pool, according to the KBRA report. Concord has used previous ABS notes to acquire Round Hill Music Royalty Fund in 2023 and Mojo Music and Media in 2022.
This type of financing makes sense for Concord because of its scale — which exceeds most banks’ normal financing abilities — and because it affords them a fixed, low interest rate.
“The benefit of an ABS market is we take out a loan and the interest rate is fixed for 5 years,” Valentine said. “It doesn’t change. Suddenly you’re financing with these fixed rates of return that are lower because of our scale and that changes the dynamic of the valuation pretty dramatically.”
This is part of a new column Billboard is launching in which we will unpack one financial issue a week for an artist in the news. Thanks for reading, and if you have suggestions or tips, email me at ediltsmarshall@billboard.com.
Concord is raising $850 million through an existing asset-backed security (ABS), according to a new report by Kroll Bond Rating Agency (KBRA). These new notes are the third series of notes of a $2.6 billion ABS. The proceeds will be used to acquire approximately $217 million of assets that will be contributed to the ABS’s collateral […]
When Tom Becci joined Concord in the newly-created role of CEO of Concord Label Group last August, he arrived with a background split between the record labels — first as a label executive in New York, then later in Nashville, ultimately as COO of Universal Music Nashville — and management, where he had spent the prior seven years at Red Light under Coran Capshaw. That gave him a view into both sides of the artist equation. “I have an understanding of what an artist needs from their standpoint, and an understanding of what a label can deliver for that artist,” Becci tells Billboard, in his first interview since taking the top job across Concord’s global recorded-music operation. “And putting them together, I think, really is what I bring to the table for the label group.”
Becci’s role in the past nine months has been one of learning and shaping, as the collection of labels and artists under his purview have reached new heights. Concord’s frontline portfolio includes Rounder Records, Concord Jazz, Fantasy Records, Fearless Records and the Kidz Bop franchise, as well as joint ventures in Loma Vista with Tom Whalley; Easy Eye Sound with Dan Auerbach; and PULSE Records with PULSE Music Group; while its catalog holdings include legendary labels like Stax, Fania, Prestige and Telarc, among others.
Trending on Billboard
It’s a lineup that already had plenty going for it: during his tenure, Killer Mike swept the rap category at the Grammys in February with his Loma Vista release Michael; Fantasy’s Allison Russell won the Grammy for best American roots performance for “Eve Was Black”; HBO announced a documentary on Stax Records called Stax: Soulsville U.S.A., which premiered in May; and Tommy Richman’s “Million Dollar Baby,” released via PULSE/ISO Supremacy, exploded out of the gate to reach No. 2 on the Hot 100 and No. 1 on the Global 200, to name a few successes.
Amid that run, Becci began to restructure parts of the label group, naming Stephanie Hudacek as the new president of Rounder Records; promoting Joe Dent and Jill Weindorf into executive vp roles overseeing operations and marketing, respectively, across the whole group; and bringing in Brad Clark to oversee a combined data analysis and streaming team, hoping to provide key, real-time insights for each of the artist campaigns that the teams are running. He’s also introduced what he calls a “portfolio approach” to catalog and frontline marketing, with each lifting the other — even if Concord doesn’t own one of their frontline artist’s catalogs, or if it owns the catalog but doesn’t have the artist signed to a frontline, as with Creed and its viral Super Bowl commercial for Paramount Plus.
Now, as Becci continues to shape Concord into a global player for all types of artists, he’s constantly looking for ways to set the company apart in an increasingly-crowded ecosystem.
“Concord sits somewhere between the major labels and the other independents and distributors,” he says. “We deliver for our artists — there’s one center of the picture and the artist belongs in it. That’s a philosophy that I want everyone to believe and feel and have the passion for. And we provide the resources to really make a difference in the musical landscape.”
Billboard: When you first started at Concord, what did you come in wanting to do?
Tom Becci: When Concord hired me, we wanted to really focus even more on the frontline business that is in place. We have a boutique label approach, but a really large infrastructure that supports each label, so there’s a unique contact point with the artist and their vision and what they want to do. And now we’re continuing to build out the team to deliver for those artists and their vision. Concord has this global footprint with direct presences in all the major markets in the world. So what I want to do is develop a frontline business with that boutique approach that delivers for artists globally.
How have you begun to restructure the company, and each label individually, to achieve that?
One of the first positions I hired, which we just recently announced, was Stephanie Hudacek, who comes from a phenomenal background of being an entrepreneur but also worked as a sound engineer and in management, so she brings that approach — not unlike mine — into Rounder Records and its presence in Nashville. Jill Weindorf, who is a 17-year veteran at Concord, promoting her into this executive vp of marketing role to really solidify these global marketing efforts to deliver for each label. Joe Dent, one of the best operators I’ve been around, promoting him and giving him responsibility over all the operations of Concord and delivering the information and resources that we all need to do our jobs. Recently, Brad Clark, who I’ve known for many years, we brought him in to oversee data analysis and streaming; they were run separately, but in today’s marketplace, having them under one leadership is really important, using what we do in data analysis and what we do in the frontline streaming world. And having them in lockstep in terms of release planning and strategy was really critical to me.
You mentioned your focus on frontline. Several of your frontline labels have had significant success lately. What do each of them bring to your portfolio, and what sets them apart?
Loma Vista, a joint venture with Tom Whalley and run by his son Ryan Whalley — bringing Killer Mike to the table and sweeping the rap categories at the Grammys is, for Concord, a huge moment in that genre, where we never had the opportunity to do those things. Ryan talked to me when I first started in September about his goals to really deliver nominations, and maybe one win, and I supported him in that vision with resources, and the results were unbelievable.
On the other side of the table, there’s Tommy Richman at PULSE — it’s the No. 1 global song. It just landed at No. 3 on the U.K. charts, which is a first ever for a Concord song. So that’s a specific vision in terms of the R&B/hip-hop music sensibilities to Concord, which builds on what Loma’s done with Killer Mike. So it’s become more of a core competency of what Concord does, and I’m proud to say we’re delivering for both those artists.
What Andy Serrao’s done at Fearless and developing that as a brand for those types of artists like Pierce the Veil, the Pretty Reckless, Wage War and on and on — there’s nowhere like it in the business, and we’re able to deliver for him as well with services. Rounder, it’s a 54-year-old legacy label in the folk/Americana/bluegrass arena, and I think there’s more for that label to do now. I think Stephanie is going to curate a roster that rivals any label in Nashville, and any in the business.
We have Easy Eye, our venture with Dan Auerbach, and we have this band Hermanos Gutierrez, which is an amazing talent; I just saw them at the Ryman last week and that was an incredible show, in terms of what they can deliver on that front. At Fantasy Records, we’ve taken an incredible A&R legend in Mark Williams and another legend in the marketing arena, Margi Cheske, and put them together as a formidable frontline duo that can deliver on both new and developing artists, and bands like Offspring and Seether and Nathaniel Rateliff and take Allison Russell to the next level. They were swimming in the same pond, and I think together they’re going to own the pond.
Where do you want to see Concord lean into, genre-wise? Further into R&B/hip-hop, or deeper into Nashville, or somewhere else?
Well, both. I think leaning into singer/songwriter and country-adjacent or alt-country, folk, Americana — genres are much more fluid today than they were when they were based on radio playlists. There’s much more fluidity now. But I do think Rounder has the ability, being based here in Nashville, to really make a statement in the singer/songwriter, alt-country, Americana genres. PULSE is already making an impact in pop contemporary music. Loma is a very eclectic label — we have the Ghost theatrical movie coming out, which is growing by the moment, and you put it with Killer Mike and Denzel Curry, that’s a highly-curated and really special roster. And I believe that what we can do with Fantasy and Concord is be not about a specific genre, but about being where you can find and develop phenomenal talent and bring it to the world.
In recent months, several label groups and companies have combined their frontline and catalog operations to streamline them better. What’s your approach to marketing your catalog and boosting sales and streams there?
This is a process that’s evolved since I’ve gotten here with the catalog, and it’s really about taking a portfolio approach, not unlike from the financial world where you have marketing experts and teams responsible for delivering for a group of artists, whether it’s a reissue, whether it’s on Spotify. But they’re in tune with each artist within their portfolio. Even if it’s a band that’s not on a Concord frontline label, but they’re going out on tour, that [our teams are] reaching out to the manager and saying, “Hey, we’ve got your catalog, let’s do things together, what are your plans for the tour?” So it’s more of a portfolio approach than managing the catalog top-down. Each pod is responsible for 25, 30 artists in that portfolio.
When we have a frontline artist and we also have their catalog, we put them together, and the frontline team, with the catalog expertise, manages the catalog so the artist knows that we’re in lockstep. Catalog and frontline can help boost each other; they go together in terms of marketing. When you have the catalog, you have the ability to warm the plate for the new meal, and that’s what I’ve seen be really successful, especially in the streaming world. And then we have an artist like Creed, where the Texas Rangers adopted “Higher” as their World Series song and it translated into a phenomenal sync in a Super Bowl commercial, then there’s a reissue of Human Clay in the summer, and the streaming growth is exponential — that’s the power of what we can do in marketing a catalog in combination with the artist. We don’t have their new record, but we’re working with them on their new release by energizing the catalog, and vice versa.
You guys also have the HBO documentary on Stax. What are you doing around that with the Stax catalog?
We’re looking at different elements of the catalog and how we can tie it into the attention brought to the Stax catalog by the documentary, and I think it’s a story that everyone is going to really love. It just gives us the ability to reignite some of these artists and re-familiarize people with these artists that they love, or they will love.
How do you guys differentiate yourselves from the majors, or even large distributors, when approaching a deal?
We take a very boutique approach. Each label has their A&R staff and their core marketing staff, and it’s small, it’s intimate, they can ask the artist, “Where do you want to go?” And then I’ve created a team in the middle that can deliver on that question, with Jill Weindorf leading the marketing efforts, Brad Clark leading the streaming and data efforts, Karen Kloack on the sync side. And we have a global reach. If you’re signed to Concord, you have a global company. You have people in the U.K. that all know and work your record. In the major world, they have different labels in different territories that your record works through. Our labels have a global footprint for each artist.
How are label deals changing — and is it getting more competitive?
Label deals have evolved dramatically from when I started to now. Data analysis identifies artists much earlier. So someone sitting in Nebraska can be identified as a burgeoning artist because of the data and what is happening on their socials and streams. So in that sense, it’s become very competitive, yes, because once it hits the data metrics everybody knows about it. So you have to approach it from, “Why are we special compared to the other record labels?” And what positions us differently is that small label approach and personalization to the artist, and then the global resource and passionate footprint that we can bring to a team, which I believe is unmatched.
You mentioned Tommy Richman. What lessons can you take from a song that just exploded out of the gate like that?
We saw a spark that weekend. Over the weekend I was firing off emails to our team, like, “We need to mobilize.” It was released on the Friday, and I was in Berlin with our head of the European team, and all we did Monday was talk about what we could do in the different marketplaces. We had data to tell us it was starting in English-speaking territories and moving outward to Germany, France and the Nordics. We were able to move very, very fast — we’re nimble, we’re quick and we’re reactive — and I think that’s the lesson we’ve all learned across the team: when you have something, you mobilize, you focus, you put your energies into taking a spark and turning it into a bonfire — and a No. 1 global hit.
How difficult is it to break new artists these days?
It’s always been difficult, because it’s always about finding talent that’s special, that has something to say that people want to hear. What is challenging today is just grabbing attention, because there are so many ways to get people’s attention — a television set, a game, things like that. But I also think there are more ways to do it than there ever were. We used to have a funnel called terrestrial radio; now we have terrestrial radio, satellite radio, social media platforms, YouTube. There are more ways to present music. But you have to still grab attention. You saw it with Tommy Richman — he grabbed attention, and people want to be part of that. It’s not harder or easier, it’s just different now.
What challenges do you see in the future?
Finding, signing and developing talent is a challenge. It’s been a challenge since I started in the music business in New York City, and it’s a challenge today. AI presents a challenge; the legislation passed in Tennessee, the ELVIS Act, is a way of protecting the creator and original works and require a license to use someone’s creative works, and I’m an advocate for the artist, the songwriter, the creator. If we’re just really diligent, AI is going to be a part of our world, but it’ll be a good and licensed part of it.
I’m really looking forward to this Tommy Richman record, which we’re trying to nail down the release of. There’s a Lindsey Stirling record, an Offspring project, a Seether record, a Nathaniel Rateliff record, looking forward to this Ghost soundtrack, the Killer Mike project, taking Hermanos Gutierrez to the next level. I love working with artists and being a part of them realizing their vision and their dreams.
Concord confirmed on Thursday it will no longer proceed with its $1.51 billion offer to buy Hipgnosis Songs Fund, giving rival bidder Blackstone a now unimpeded path to acquire the Merck Mercuriadis-founded company and its catalogs of the Red Hot Chili Peppers, Journey, Neil Young and others. Explore Explore See latest videos, charts and news […]
Blackstone looked poised to take over Hipgnosis Songs Fund (HSF) on Thursday after Concord Music said it would not outbid the global investment firm.
Concord surprised Blackstone and the broader market on April 18 when it announced it had the unanimous support of HSF’s directors to take over the troubled music royalty fund for £0.93 ($1.14), a bid that valued the company at $1.402 billion.
Explore
See latest videos, charts and news
See latest videos, charts and news
Concord once raised its offer to $1.25 per share, but Blackstone stole the board’s endorsement when it made it a superior offer that valued the company at $1.6 billion on April 29. Concord said Thursday that its last offer was final and will not be increased, effectively bowing out of the bidding war.
While Blackstone’s bid still needs approval from 75% of Hipgnosis Songs Fund shares, it has been the most likely buyer for shareholders looking for an offramp from the 5-year-old fund’s tumultuous last six months.
Trending on Billboard
Hipgnosis Songs Fund’s assets, which include stakes in the catalogs of Red Hot Chili Peppers, Neil Young, Journey, Lindsey Buckingham, Blondie and others, are prized by its investors and rival music companies, but the fund has been plagued by management and accounting missteps that overstated both revenue and its portfolio’s valuation, according to a due diligence report by investment bank Shot Tower Capital released March 28. HSF’s share price plummeted after its board cancelled the dividend and slashed the value of its portfolio.
Blackstone already owns two other entities under the Hipgnosis name — the private music assets investment fund Hipgnosis Songs Capital (HSC) and the the Merck Mercuriadis-led investment advisor Hipgnosis Song Management (HSM) .
An option in HSM’s contract effectively makes Hipgnosis Songs Fund Blackstone’s to lose. The option, which dates back to the fund’s initial public offering in July 2018, stipulates that the entity that Blackstone owns could match any take-over offer for the fund’s assets, a clause intended to give artists confidence their song rights and royalties would not frequently change hands.
HSF’s board will meet in June and is expected to hold a shareholder vote to approve Blackstone’s bid, with a deal ultimately coming to a close possibly in mid-July.
Concord Label Group has promoted Joe Dent to executive vp of operations and Jill Weindorf to executive vp of marketing, the company announced Tuesday (April 30). Weindorf is based in Los Angeles while Dent is located in Concord’s Nashville headquarters.
The promotions, some of the first under newly-appointed Concord Label Group CEO Tom Becci, aim to modernize Concord’s structure to support an expanding roster of talent while increasing the company’s ability to sign, develop and support artists within the global ecosystem.
Weindorf began her career in marketing at Elektra Records and has spent 17 years at Concord. In her new role, she will lead marketing efforts across Concord’s eight active labels and, in conjunction with Concord’s label presidents, continue to develop career artists globally.
Trending on Billboard
Dent previously spent a decade at Fat Beats Distribution, where he rose to GM. Since joining Concord, he has led the charge to stabilize the company’s vinyl pipeline during the COVID-19 pandemic, increased its in-house spatial audio capacity and developed a business-to-business (B2B) system for interacting with artists. In his new capacity, Dent will continue to concentrate on improving processes across the active label and back-office teams. He will also build further internal system efficiency and interconnection while working with external partners on capacity, supply chain and process efficiencies.
“Music is about connection and Jill’s ability to devise a marketing strategy in concert with an artist, while considering their priorities, who they are, the place they want to be, and then work tirelessly in support of that plan is unparalleled,” said Becci in a statement. “Having Jill in this role will certainly allow Concord to remain competitive in an increasingly complicated and global market. Joe has an incredible understanding of how to look at a classically messy system, identify areas for improvement, and make real and lasting corrections. I have no doubt that Joe will continue guiding Concord towards further operational efficiencies in support of our artists.”
“My focus has always been the artists and music,” Weindorf said in a statement. “Concord has offered me the opportunity to build long-term trust with so many career artists and I love being part of the journey with them. I’m also excited by our legacy recordings and the depth and historical relevance of our catalog. Many executives don’t get the chance to work across such a wide breadth of repertoire; I have been here for 17 years, and I am still excited by that opportunity every day.”
“What I genuinely appreciate about Concord is that, despite our size, we are still incredibly nimble,” added Dent. “If we believe there is a superior way that we can do things, there is a reasonable chance that we will do it that way. I’m incredibly grateful for the trust that so many amazing artists put in us and I’m excited to continue finding ways we can better support them. This really is a dream come true for a punk from New Jersey.”
Blackstone saw Concord’s most recent offer of $1.25 per share to acquire Hipgnosis Songs Fund and raised it a nickel to $1.30 on Monday, potentially putting a capper on a back-and-forth bidding war for the music rights company’s assets.
In a joint announcement, HSF and Blackstone said the board of directors of both companies approved of the revised all-cash acquisition of Hipgnosis’s assets at a value of nearly $1.6 billion, up from Concord’s most recent bid that valued the company at around $1.51 billion.
The new price reflects a 48.1% premium over HSF’s closing share price on April 17, the day before Concord’s initial offer became public. Any offer will require the support of investors representing at least 75% of the company’s public shares at a court meeting expected to be held on June 10; until that date, additional new offers may still be lodged.
Trending on Billboard
Blackstone’s official bid arrives a week after the private equity giant made what it called a “possible offer” of $1.24 per share, or roughly $1.5 billion, on April 22. HSF’s board of directors signaled that they would support that bid if it was made official, however two days later (April 24) Concord raised their bid by one penny and the board reversed and unanimously recommended shareholders approve the Concord bid.
With Blackstone upping the bid by $0.05, the board now says that “after careful consideration” the revised bid “represents a superior offer for Hipgnosis shareholders” compared to Concord — and now will recommend shareholders to access the new terms.
“The Board is pleased to unanimously recommend this [offer] for Hipgnosis from Blackstone,” said Hipgnosis chair Robert Naylor. “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.”
The London-listed fund owns rights to songs by Neil Young, Journey, Lindsey Buckingham, Red Hot Chili Peppers, Shakira, Blondie and other artists.
Hipgnosis Songs Fund’s stock price fell 6.75% on the news, from $1.35 on Friday when Concord’s bid increase pushed the stock to a 52-week high to $1.26 by 9 a.m. Monday New York time.
Blackstone is also the majority owner of Hipgnosis Songs Fund’s investment adviser, Hipgnosis Song Management (HSM), and it funds Hipgnosis Songs Capital (HSC), a private music rights fund operated with HSM that has its own portfolio of music rights from such stars as Justin Bieber and Kenny Chesney.
Concord Music raised its bid to take over Hipgnosis Songs Fund (HSF) on Wednesday (April 24) to $1.25 per share, one penny higher than the competing offer that Blackstone floated on April 20 — further ratcheting up the fight for control of the music rights company’s assets.
Concord’s new all-cash offer values Hipgnosis’s assets — which include rights to songs by Red Hot Chili Peppers, Christine McVie, Blondie, Shakira and Journey — as worth around $1.51 billion. It includes a plan to sell up to 30% of Hipgnosis’ assets within 18 to 24 months of an acquisition, according to a filing with the London Stock Exchange.
HSF’s board of directors unanimously recommended shareholders approve this new bid from Concord, a reversal from Monday (April 22) when those directors said they would support an offer from Blackstone equivalent to $1.24 per share if the investment giant made it official. Blackstone’s bid remains a “possible offer,” according to the company’s statement on Saturday (April 20).
Trending on Billboard
“Concord … remains committed to becoming the new owner of Hipgnosis,” the filing reads. “The Hipgnosis Directors believe that the Increased Concord Offer is in the best interests of Hipgnosis Shareholders as a whole, and accordingly unanimously recommend that Hipgnosis Shareholders vote in favour of the resolutions required to implement the Increased Concord Offer to be proposed at the Court Meeting and the General Meeting which are due to be held on or around 10 June 2024.”
The new offer presents a 42.6% premium over HSF’s closing share price on April 17, the day before Concord’s initial offer became public. Any offer will require the support of investors representing at least 75% of the company’s public shares at a court meeting expected to be held on June 10; until that date, additional new offers may still be lodged.
Concord plans to finance the acquisition through a combination of debt and equity, with the majority of the equity financing coming from Concord followed by “minority participation by Apollo Funds.” Apollo will also provide the debt, the amount of which has not been disclosed.
Blackstone floated a “possible offer” of $1.5 billion, or $1.24 per share, to buy Hipgnosis Songs Fund over the weekend. The private equity giant owns two other entities under the Hipgnosis name, including a private music royalty fund with its own catalog holdings worth more than $700 million. Blackstone has yet to file an official bid.
Last year, Concord acquired Hipgnosis rival Round Hill Music Royalty Fund for $468 million in the biggest catalog deal of 2023. Through that acquisition, Concord gained rights to over 150,000 songs, among them works by The Beatles and tunes recorded by Elvis Presley, Meatloaf, James Brown and Billie Holiday.
The cloudy future of Hipgnosis Songs Fund (HSF) became clearer on April 18, when the embattled company’s board of directors publicly supported a $1.4 billion takeover bid by Concord, followed two days later by a $1.5 billion offer by investment giant Blackstone.
Regardless of the buyer, an acquisition would mark an end to the 5-year-old London Stock Exchange-listed company and give shareholders an offramp after HSF faced questions about its operational acuity and, most recently, alleged evidence of accounting missteps that overstated both revenue and its portfolio’s valuation.
Concord’s offer is a 32.2% premium over HSF’s closing price on April 17, but the board said it would support Blackstone’s offer — which represents a 41.8% premium — if the asset manager makes it official.
Trending on Billboard
Blackstone’s bid for the publicly traded music rights company wasn’t a surprise: It owns two other entities under the Hipgnosis name. Blackstone is the majority owner of the public fund’s investment adviser, Hipgnosis Song Management (HSM), and it funds Hipgnosis Songs Capital (HSC), a private music rights fund operated with HSM that has its own portfolio of music rights from such stars as Justin Bieber and Kenny Chesney. Sources say Blackstone’s private fund, HSC, is worth upwards of $700 million. HSM has the right to buy HSF’s portfolio if its advisory agreement is terminated — and Blackstone and HSM “will vigorously protect its interests should the company purport to terminate the [investment advisory agreement],” according to a statement issued by HSM on April 22. “We will use all means necessary to defend our contractual position and interests.”
Neither HSF nor HSM responded to requests to comment for this story.
When investors vote on a proposed acquisition at HSF’s June 10 board meeting, a majority of stock- holders representing at least 75% of voting rights must approve the deal. Before Blackstone’s offer, Concord’s bid had the support of shareholders that own 29.4% of the company’s equity.
Any offer would free the fund and its investors from a serious bind. Once a freewheeling darling of the music business that acquired rights to music by Red Hot Chili Peppers, Neil Young and Shakira, the company suffered from a struggling share price, the cancellation of the dividend and — the coup de grace — an unflattering due diligence report by investment bank Shot Tower Capital released March 28 that found the company’s investment adviser, the Merck Mercuriadis-led HSM, committed a series of missteps. Among them: HSM “materially overstated” annual revenue by improperly accounting for revenue and missed growth forecasts on 75% of the fund’s catalogs by an average of 23% annually, and the investment adviser overstated the amount of control that HSF has over the rights it had acquired. The latter conclusion is key to the value of HSF’s portfolio because owning a song’s copyright is more valuable than owning a writer’s or producer’s share of the royalties it generates.
As a result of its findings, Shot Tower lowered HSF’s portfolio value by 26%, from $2.62 billion to $1.95 billion.
“Shareholders are going to vote for whichever [bid is] the higher,” says Josh Gruss, co-founder and CEO of Round Hill Music, who until last November, ran Round Hill’s rival publicly listed music royalty fund. (Concord bought that public fund last year, and Gruss became a Hipgnosis shareholder a few months later.) “I think investors have been through such a roller coaster most of them just want their money back.”
HSM’s response to the Shot Tower report, which was issued the same day, claimed that aspects of it were “factually inaccurate and misleading.”
Not surprisingly, several of HSF’s largest and most long-lasting investors were angered by the report’s findings. Investment managers, some of whom spoke on the condition of anonymity because they did not want to comment publicly before the next board meeting, said that the report’s findings presented extraordinary examples of gross incompetence and “myriad” accounting issues.
Stifel analyst Sachin Saggar, who raised red flags about the company’s accounting and valuation as far back as 2021, says the Shot Tower report revealed “a catalog of errors” that should have been prevented by the layers of protection — a board of directors, an independent auditor, internal systems and adherence to accounting principles — typically afforded to investors.
“If you had a half-decent board at [the initial public offering], you [could] have stopped some of these things happening very easily because they’re quite obvious and they were well-flagged by us three years ago.”
Merck Mercuriadis on Feb. 8, 2021 in Los Angeles.
Spencer Lowell
While the offers could be the answer to HSF’s financial straits, if the Concord bid gets accepted, one question remains: What becomes of Mercuriadis, who is the founder and public face of Hipgnosis, the chairman of HSF’s investment adviser and, until recently, the cocksure self-appointed spokesman for the red-hot song catalog sales market?
The Shot Tower report reinforced doubts that the board can continue to work with Mercuriadis and his team — one investor deems the relationship “broken down” — although parting with him is easier said than done.
Terminating the investment adviser’s contract without cause would give HSM a termination fee and, more critically, an option to buy the entire portfolio at whichever is highest: fair market value, a third party’s bid or the company’s market capitalization.
According to the April 18 announcement, Concord would take over management of HSF’s assets after “a brief transition period” during which Mercuriadis’ HSM remained the investment adviser. The announcement stated that the two sides have not yet begun discussions about terminating the investment advisory agreement.
Matt Hose, a London-based equity analyst for Jefferies, says the HSF board “is trying to highlight that Merck was incompetent so they can terminate [the investment adviser] with cause and not pay out the fees.” He adds that this strategy would prevent Mercuriadis from “stopping the board from selling the portfolio in the open market and getting full value.”
Removing the investment adviser would be an unusual outcome. Hose says he has never seen an investment manager terminated for cause in the 15 years he has covered investment trusts.
HSF’s largest investors support terminating the investment adviser’s contract, but they were reticent to say that the board can prove it has sufficient reason to fire HSM “with cause.”
“People are pretty fed up with the [investment adviser] as a result of this [report],” one investment manager says. “There are some quite extraordinary allegations in this report. I don’t think I’ve seen accusations of gross incompetence laid out in this way. I’ve seen accusations of fraud, but not this.”
Hose points out that, counterintuitively, HSF’s stock price rose 10% on the day the Shot Tower report was released.
“Shareholders want termination for cause because it’s the cleanest exit. Whether they’re going to get it or not — that’s the question.”
If the board moves to terminate the investment manager with cause, investors say Mercuriadis and Blackstone may fight it in court. In such a scenario, they say the two sides would probably settle with HSF for a lump sum of money but not the right to buy the portfolio. They note that a prolonged court battle would bring Blackstone the kind of negative headlines it’s known to avoid.
Other catalog portfolio managers say, bad press be damned, Blackstone will not give up its right to HSF’s quality assets.
“The underlying assets are solid, whether they paid one turn or two turns too much,” says David Schulhof, CEO of music-focused exchange traded fund MUSQ.
A Blackstone acquisition, on the other hand, would be the best outcome for Mercuriadis, as HSM would continue to oversee the portfolio. Regardless of how the aftermath plays out, half a dozen HSF investors and analysts said they cannot see Mercuriadis and HSM remaining the investment manager of a publicly traded fund or the fund continuing as a publicly listed entity.
“It has to spin into a sale at this point,” Round Hill’s Gruss says. “It’s clear that even before these announcements shareholders were hell bent on removing Blackstone as the investment adviser, through legal means or otherwise. It’s a much more elegant solution for shareholders to just sell.”
Despite the enduring value of much of HSF’s portfolio, the board is telling shareholders that a quick sale is their best option. In its April 18 announcement, the board indicated that accepting Concord’s bid would “[mitigate] the risks we see ahead to achieving a material improvement in the share price.” Other than an outright acquisition, it warned, “all alternative options carry significant risks, uncertainties and limitations.”
A version of this story will appear in the April 27, 2024, issue of Billboard.
Hipgnosis Song Management (HSM), the investment advisor for the troubled music royalty fund Hipgnosis Songs Fund that has come under scrutiny for its handling of accounting issues, released a statement Monday (April 22) saying it has “repeatedly been blamed for many issues affecting the [Songs Fund] which were not HSM’s responsibility” and that it “will vigorously protect its interests should the [Songs Fund board] purport to terminate” it as investment advisor.
The statement comes after a wave of headlines in the past month dating back to the March 28 release of a report by Shot Tower Capital which alleged that HSM, as investment advisor for Hipgnosis Songs Fund — which owns full or partial rights to song catalogs from the Red Hot Chili Peppers, Shakira and Neil Young, among others — overstated its revenues, the scope of its assets and its earnings in disclosures to investors and regulators. That followed a vote last October in which shareholders first rejected a proposed sale of some of the fund’s song catalog and a subsequent vote of no to continuation — the equivalent of a vote of no confidence — in the fund’s previous board and its investment advisor HSM, prompting the formation of a new board with a new chairman, Rob Naylor. (Merck Mercuriadis, the founder of the fund, moved from CEO of HSM to chairman in February.)
Trending on Billboard
In the past few days, two potential takeover bids have been submitted to the board of Hipgnosis Songs Fund: one from Concord at $1.4 billion and the other from Blackstone, which is the majority owner of HSM, at $1.5 billion. The initial Concord bid suggested that the publishing company would take over management of the fund’s catalog from HSM, which would require 12 months’ written notice; a fee equal to one year of services; and, at the end of that year, allowing HSM to exercise a call option to buy the portfolio’s assets by outbidding any competing offer, according to previous filings.
In the new statement, HSM indicates that it would exercise that call option if it becomes necessary.
“Based on extensive legal advice we are confident that the [Songs Fund] has no legal grounds to terminate our relationship without being subject to HSM’s contractual rights contained in the [investment advisory agreement, or IAA],” Hipgnosis Songs Management’s statement reads. “HSM has explained this in detailed legal correspondence with the [fund]. The [fund] has not responded to HSM on the legal arguments it has presented.
“HSM will vigorously protect its interests should the [fund] purport to terminate the IAA,” the statement continues. “We will use all means necessary to defend our contractual position and interests. It is important that shareholders, songwriters and artists understand that HSM has acted appropriately and professionally in our role as Investment Advisor and fully in accordance with the IAA.
“To be clear, were the [fund] to purport to terminate the IAA and/or hand HSM’s responsibilities under the IAA to a third party, HSM and its majority shareholder are fully resolved to protect all of our rights under the IAA, including the right to exercise the call option to acquire the [fund]’s assets.”
Earlier today, the board of Hipgnosis Songs Fund said that, were Blackstone to officially file its $1.5 billion bid to take over the company, it would support that option over the Concord bid from last week. And given Blackstone’s majority ownership of HSM, it would presumably follow that HSM would then continue in its role as investment advisor, meaning HSM would not have to exercise its call option in the end. The Blackstone bid is effectively the same as the call option.
Further bids may still arise as the situation continues to unfold. The next step would be a June 10 meeting in which shareholders would vote on approval of any bid that formally comes in.