Hipgnosis says fund manager refuses to drop option to buy its songs
Embattled music rights fund Hipgnosis has said its investment adviser Merck Mercuriadis is refusing to drop the “call option” from their advisory agreement, allowing him to bid for its portfolio.
The London-listed fund added that an independent review found Mercuriadis was “cherry picking” the firm’s best performing songs to sell to another fund he managed.
Mercuriadis founded both Hipgnosis and its investment adviser Hipgnosis Song Management (HSM), which manages the company’s more than 150 catalogues.
Hipgnosis last year proposed selling $465m (£365m) worth of its music to another fund run by HSM and owned by US private equity giant Blackstone.
It said on Tuesday that two independent research reports found the 29 song catalogues put forward by Mercuriadis “were growing at materially higher rates to the overall portfolio and were therefore ‘cherry picked’”.
The company’s newly-constituted board is investigating the findings of the reports and, if the allegation is true, whether it was disclosed to the previous board.
It said it had requested Mercuriadis remove the adviser’s “call option” that gives it the right to buy the fund’s portfolio once their agreement ends.
The fund has said in the past that the option created a conflict of interest between its shareholders and the adviser.
Hipgnosis has scheduled an extraordinary general meeting for 7 February to vote on enshrining the payment of a fee of up to £20m to make sure prospective bidders for the company are not deterred by the option.