Struggling Hipgnosis Songs Fund calls for extraordinary shareholder meeting

(Reuters) -Struggling British music investor Hipgnosis Songs Fund said on Thursday it had called for an extraordinary shareholder meeting to vote on a special resolution that could help the company draw potential bidders.

Hipgnosis’ board is proposing to amend the articles of the company to enshrine the payment of a fee of up to 20 million pounds ($25.37 million), as a form of “cost protection” to prospective offerors, according to the fund.

Shareholders had revolted in October, rejecting the fund’s proposed $440 million deal to sell 29 catalogues to Hipgnosis Songs Capital – a partnership between Blackstone Inc and the fund’s investment adviser Hipgnosis Song Management (HSM).

The music royalties fund holds copyrights to catalogues of several artistes such as Shakira, Neil Young and Red Hot Chili Peppers.

“From our shareholder consultation, core to the requirement for change is addressing the Call Option,” said Chairman Robert Naylor, who joined the board in November from recently acquired Round Hill Music, after several board members resigned following the shareholder revolt.

HSM, which is responsible for managing more than 150 song catalogues, holds a ‘call option’ that gives it the right to purchase the fund’s portfolio if and when the agreement with the fund is terminated.

“This (call option) not only acts as a structural conflict between the interests of our shareholders and the Investment Adviser, but also creates a significant deterrent to potential bidders for the company’s assets, thereby depressing the value of the company,” Naylor added.

Merck Mercuriadis, the founder of Hipgnosis Songs Fund and HSM, is also the CEO of HSM.

Reuters could not immediately reach HSM for comment.

($1 = 0.7882 pounds)

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Rashmi Aich and Janane Venkatraman)