Hipgnosis launches strategic review

(Sharecast News) - Hipgnosis Songs Fund is to launch a strategic review, the troubled music rights owner confirmed on Thursday, as it looks to win over shareholders ahead of a crucial vote. The firm stressed that while it did not envisage a sale of the company, it would consider all options, including future management arrangements. HSF is managed by its investment adviser, Hipgnosis Song Management, which is run by HSF's founder, the former band manager Merck Mercuriadis.

Shareholders are due to vote next week on two motions: approving a continuation of the investment trust for another five years, and the sale of some of the firm's music catalogues.

However, the proposed sale - to a partnership between HSM and funds advised by Blackstone - has been criticised by one of HSF's biggest shareholders, Asset Value Investors.

HSF said the $465m sale of 29 catalogues would help it reduce debt and fund a share buyback programme. But AVI - which has a 5% stake - claims there are "inherent conflicts" in selling to a related party, and believes the sale process was uncompetitive.

It is therefore urging fellow investors to vote against the sale.

HSF said on Thursday that it had considered serving notice on its investment advisor, but had concluded it was not in shareholders' interests to do so, as it could put the firm into technical default.

It also asked the investment adviser to remove the clause in its agreement relating to the call option entitling it to acquire the company's portfolio on termination of its contract. However, the investment advisor "declined to accept".

As at 1000 BST, shares in HSF were up 2% at 74.31p. The stock slumped on Monday after HSF announced it was scrapping the interim divided on the back of lower-than-expected payments from its US catalogue.