Hipgnosis
Hipgnosis Songs Fund, one of the most influential players in the catalog acquisition market run-up of recent years, and Barry Manilow are embroiled in a pair of lawsuits over $1.5 million in unpaid bonuses Manilow’s team claims Hipgnosis agreed to when it acquired his catalog.
Hipgnosis Songs Fund sued first in the High Court in London on August 12, saying they do not owe Manilow these bonuses, and that Manilow, Manilow Productions and Stiletto Entertainment are in breach of contract for not turning over certain payments they received from Sony Music. The “Mandy” singer and his management company sued back in United States federal court in California on Aug. 28, claiming that Hipgnosis does owe Manilow $1.5 million in bonuses, and that the fund did not actively promote his work, thereby avoiding these performance-linked bonuses — logic Hipgnosis calls flawed.
In other circumstances, this may have been treated like a mundane contract dispute. But Manilow’s legal team allege in the suit that Hipgnosis, through its founder Merck Mercuriadis — the man behind the formerly London-listed fund’s famous appetite for acquisitions — falsely represented that it had the people and know-how to increase the money generated by Manilow’s master recordings. Mercuriadis is not party to either lawsuit, and through a spokesperson he declined to comment for this article.
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According to a copy of the contract included in Hipgnosis’ lawsuit, the company acquired 100% of Manilow’s worldwide income (excluding SoundExchange royalties) from his master recordings for $7.5 million. Two bonus payments were to be paid out if, for the first payment, the income Hipgnosis received from its share of the assets increased by at least 10% year-on-year compounding for each of the first three years; and if, for the second payment, the income Hipgnosis received increased by at least 10% year-on-year compounding for years one through four.
Manilow’s legal team says in its suit that Hipgnosis described promotional strategies that included album reissues, special compilations and synch deals, as well as less traditional strategies like a YouTube Karaoke channel, Instagram giphy packs and Copacabana-themed dance trends.
“Hipgnosis did not carry out a single one of its touted promotional strategies; upon information and belief, it did nothing at all in order to keep the cash income below the levels required to meet the condition precedent for the additional purchase price payments,” Manilow and Stiletto Entertainment’s legal team alleges in the complaint. Manilow also missed out on expected complementary increases in the value of his publishing royalties and his Las Vegas residency, they claim in the suit.
In its suit, Hipgnosis alleges that Manilow, Manilow Productions and Stiletto Entertainment breached their contract that laid out when bonuses would be paid because Manilow & co. received two royalty payments from Sony — for the period from July 1 to December 31, 2022, and January 1 to June 30, 2023 — that they ought to have turned over to Hipgnosis but didn’t. In addition, Hipgnosis says in the lawsuit that Sony Music suspended payment of royalties for the period from July 1 to December 31, 2023. Sony Music through a spokesperson declined to comment.
Regardless, Hipgnosis says in the suit it does not owe the bonuses because the income received never met the performance targets, and it is seeking to recover 100,000 pounds from Manilow and his production and management teams.
“The matter of the bonus payment is a routine contractual matter regarding interpretation of certain contract clauses,” a Hipgnosis spokesman said in an emailed statement. “While we regret that this couldn’t be resolved directly between the parties, the court is now best placed to offer a final and definitive opinion on this matter. We have full confidence in our position and the legal process.”
Representatives for Hipgnosis also dispute Manilow’s team’s logic that Hipgnosis did not promote his works so as to keep the income levels below the thresholds that would trigger the bonus payouts, saying that logic is false because acquisition deals are structured to incentivize Hipgnosis to optimize the asset. Performance bonuses by definition are paid out when the asset does well, which benefits the artist and Hipgnosis, they say.
“Hipgnosis’ model is based on a strong alignment of interest between songwriters and artists and our business,” Hipgnosis’ spokesperson said in the emailed statement. “We continue to hold Barry and his music in the highest possible regard. To suggest that Hipgnosis would deliberately withhold promotional efforts for these recordings would not make commercial sense. These claims are baseless, and we will defend them vigorously should that be necessary.”
Manilow’s case is currently a one-off. However, the board of Hipgnosis Songs Fund said that, as of Sept. 30, 2023, it was liable to pay out as much as $68.1 million in catalog bonus provisions across 10 catalogs, of which the disputed Manilow bonuses are just one. Hipgnosis Songs Fund has since been taken private by Blackstone and no longer discloses this level of financial data.
Barry Manilow is suing Hipgnosis Songs Fund (HSF) in federal court in California seeking $1.5 million in unpaid bonuses related to the music rights company’s acquisition of his catalog four years ago. The suit by the “Mandy” singer, along with his management company Hastings, Clayton & Tucker Inc, or Stiletto Entertainment, follows a similar lawsuit […]
LONDON — Hipgnosis Song Fund is suing Barry Manilow over bonus payments relating to its acquisition of the singer’s catalog four years ago.
The lawsuit was filed at the High Court in London on Monday (Aug. 12). The case is listed as breach of contract, but details of the claim are not publicly available. Three defendants are listed on the court filing: Manilow; Manilow Productions; and the artist’s management company – Hastings, Clayton & Tucker Inc trading as Stiletto Entertainment. News of the court case was first reported by the Financial Times.
In a statement to Billboard, a spokesperson for Hipgnosis described the dispute as a “routine commercial matter concerning the interpretation of certain clauses in a contract regarding bonus payments, which the court is ideally placed to address.”
“While we regret that this couldn’t be resolved directly between the parties, we continue to hold Barry and his music in the highest possible regard and we are confident that this can be resolved in a fair and reasonable way,” the spokesperson went on to say.
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Billboard understands that the claim is for a low sum in the single digit millions. Representatives for Manilow either did not respond to requests to comment or could not be reached.
The court action comes almost exactly four years after Hipgnosis announced that it had acquired 100% of Manilow’s worldwide recording royalties (excluding SoundExchange royalties) in his catalog, comprising 917 songs, for an undisclosed figure. The deal included some of the 81-year-old singer’s biggest hits, including “Mandy,” “I Write the Songs,” “Looks Like We Made It,” “Can’t Smile Without You” and “Copacabana (At the Copa).”
Speaking in 2020, at the time of the catalog acquisition, Hipgnosis founder Merck Mercuriadis called Manilow “an incomparable artist, songwriter, arranger, musician and performer,” while the veteran singer praised Mercuriadis for creating “a new type of music company.”
A great deal has changed at Hipgnosis since then.
Last month, private equity group Blackstone completed a $1.6-billion acquisition of the six-year-old, London-listed investment trust that had amassed a huge catalog of 65,000 copyrights including songs by Red Hot Chili Peppers, Journey, Shakira, Blondie and Neil Young.
The takeover followed a tumultuous year in which the publicly traded fund faced a shareholder revolt following a series of missteps and accounting scandals, culminating in bitter infighting between the fund’s board and its investment manager, Hipgnosis Song Management, which was led by Mercuriadis.
The former manager of star acts like Beyoncé, Guns N’ Roses and Elton John announced that he was stepping down as chairman of Hipgnosis Song Management in July, having relinquished his role as chief executive officer earlier this year.
Six years after going public on the London Stock exchange, a majority of Hipgnosis Songs Fund shareholders voted on Monday (July 8) to sell the fund to Blackstone for $1.6 billion, according to a regulatory filing. According to the filing, 99.97% of shares voted voting in favor of selling to the private equity giant–59.21% of […]
Hipgnosis Song Management announced on Tuesday that Merck Mercuriadis will be stepping down as chairman of the music investment advisor. In giving his notice, which goes into effect upon closing of the proposed acquisition of Hipgnosis Songs Fund to private equity giant Blackstone, HSM’s founder called it the “right time” and a “timely opportunity for me […]
Blackstone doesn’t intend to increase its latest offer to acquire Hipgnosis Songs Fund (HSF), the London-listed investment trust it first launched a takeover bid for on April 20. The private equity firm said in a regulatory filing Tuesday (June 25) that the financial terms of its June 3 offer “are final and will not be […]
Global investment giant Blackstone said on Monday it would pay a penny more to take over Hipgnosis Songs Fund (HSF), the London-listed company that owns Red Hot Chili Peppers’ catalog, because in a revised takeover plan disclosed Monday it is paying less in advisory fees. In a joint announcement, Blackstone and HSF’s board of directors said they approved the offer […]
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.
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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.
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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.
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.
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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.