Monday , January 24 2022

Blackstone tunes the Hipgnosis strategy with a $ 1 billion music investment


The booming value of old successes has caught the attention of one of the largest private equity groups in the world, allocating $ 1 billion to a new fund for the purchase of music catalogs.

Blackstone will fund the vehicle which will be managed by Hipgnosis Song Management, the company run by music mogul Merck Mercuriadis. The fund will acquire the rights to evergreen songs that have increased in value during the era of transmission.

The New York-based group will also buy a stake, the size of which it would not disclose, it told HSM on Tuesday. The music company runs the London-listed Hipgnosis Songs Fund, which has been at an accelerated pace of buying, securing works by artists such as Blondie and Neil Young and spending more than $ 2 billion in the process.

The launch of the independent fund with the support of Blackstone, dubbed Hipgnosis Songs Capital, comes as private equity groups increasingly focus on music publishing offerings.

Apollo said last week that it would launch a new investment company, HarborView, with a $ 1 billion investment in music rights, and KKR has teamed up with music company BMG to set up a new fund while investing directly in composers for take advantage of future revenue streams.

KKR is in talks to acquire a $ 1 billion song catalog that will cover hits from Lorde, the Weeknd and Major Lazer, according to a report in Billboard magazine. The firm declined to comment.

Investors see music rights as a high-growth opportunity where old songs, like Fleetwood Mac’s “Dreams,” can generate great returns through streaming platforms and social media. Universal Music Group, which traded in Amsterdam last month and is now valued at about 45 billion euros, soared in its commercial debut which demonstrated the interest of the sector.

“This new partnership with Blackstone will provide financial strength to invest in proven songs and to grow our song management team,” said Mercuriadis, who previously directed artists such as Elton John and Beyoncé.

The structure of the deal, which follows five months of “intense” negotiations, according to Blackstone, would mean Mercuriadis would launch possible acquisitions on both the new fund and its existing listed fund. “The tender is mine,” he told the Financial Times.

Music mogul Merck Mercuriadis

Music mogul Merck Mercuriadis, whose Hipgnosis Songs Fund is the UK’s largest listed investor in catalogs and copyright © Matt Winkelmeyer / Getty / SXSW

Blackstone declined to say whether it is acquiring a majority or minority stake in HSM, or at what valuation it is buying.

Direct investment in the song manager will allow you to expand your staff and improve your ability to generate more sums from your catalog.

Blackstone’s investment in the new vehicle will be in equity and debt and will come from its fund of tactical opportunities.

Qasim Abbas, senior CEO of Blackstone’s Tactical Opportunities Unit, said the private equity group saw “long-term sustainable value” in music rights. “As an asset class, it is still in the early stages of evolution,” he told FT.

JPMorgan analysts said in a note that Blackstone’s financial weight could allow Hipgnosis to make larger bids than those made under its own steam. “The possibility of co-investing. . . it can mean the opportunity to acquire in the future catalogs of higher value than could have been done previously, ”they wrote.

Shares of Hipgnosis Songs Fund have risen about 18% since trading in 2018 and rose 4% after Blackstone’s announcement to its highest level in a year.

This year, Stifel analysts expressed concern about how Hipgnosis values ​​the songs it has acquired. Numis also said Hipgnosis’s financial resources were difficult to assess, given the lack of available information. The fund has responded by increasing the level of detail it publishes about its purchases.

The connection with Hipgnosis is not Blackstone’s first musical foray. He led a consortium that bought the musical assets of Peppa Pig-maker Entertainment One, including the influential hip-hop label Death Row Records, from toy company Hasbro in a $ 385 million deal this year.

Additional reports from Antoine Gara in New York

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