MERCK SELLS TO MERCK

Hipgnosis boss Merck Mercuriadis has announced that, after consulting with shareholders, he's taken action to address the company’s share price, which is trading at a significant discount relative to the value independent valuer Citrin Cooperman has placed on its portfolio.

This will be accomplished by selling 29 catalogs from Hipgnosis Songs Fund to Hipgnosis Song Capital (Merck’s partnership with Blackstone) for a proposed $440m. In addition to providing the funds to buy back shares and reduce debt, the transaction would establish a new benchmark for the company’s Net Asset Value (NAV) by basing it on a concrete transaction rather than an institutional appraisal. (The recent acquisition of Round Hill by Concord has aided that process.)

As this is a related-party transaction, there will be a 40-day “go-shop” period, which will enable other potential buyers of the catalogs earmarked for sale to HSC to make offers that would result in higher net proceeds. HSC would then have the right to match those offers.

As a separate transaction, Hipgnosis has agreed in principle to sell, for $25m+, what is estimated to be more than 20k “non-core” songs not owned outright or in perpetuity. These songs came with the company's purchase of Kobalt Fund One in 2020. The company acquired KF1 for the catalogs of Steve Winwood, The B-52’s, 50 Cent, Walter Afanasieff (“All I Want for Christmas Is You”), Enrique Iglesias and more, not these extraneous songs, which do not conform to Hipgnosis' investment strategy and require ongoing accountings to more than 1,000 songwriters.

Complete details on the plan can be found here.

We’d like to thank Merck for taking the time to dumb this down for us, after which we asked him to dumb it down some more. Then we got a headache and took a nap. Then we woke up and remembered that we still didn’t understand this. But maybe you will.

Pictured: Merck Mercuriadis and also, Merck Mercuriadis