In an extraordinary general meeting held today (7 February), 99.9% of shareholders who voted cast their shares in favour of the amendment to the articles of the company, allowing the board access to a discretionary payment of up to £20m to any bidder who presents terms “recommendable to shareholders”.
More than two-thirds (68.4%) of total voting rights were exercised at the EGM.
Incentive fee for Hipgnosis bidders seen as ‘marginal positive’ for shareholder value
The special resolution was proposed as a partial solution to the unattractive nature of submitting a bid for SONG assets, caused by the call option held by investment adviser Hipgnosis Songs Management (HSM).
The clause within the investment advisory agreement gives HSM the right to purchase the portfolio upon termination of the agreement, which the board argues depresses the potential value of the company by limiting opportunities for shareholder value creation.
Earlier this month, Robert Naylor, who was appointed SONG chair in November 2023, described the call option 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”.
On 23 January, HSM rejected calls from the board to “unconditionally remove” the call option.
Hipgnosis rejects board’s request to scrap ‘material conflict of interest’ call option
In a statement, Naylor thanked shareholders for their “continuing support” and reasserted the focus of the board on the ongoing strategic review and said shareholders will be updated as to the outcome of due diligence “in due course”.
SONG has also recently appointed a legal firm to seek an indemnity from founder Merck Mercuriadis and investment manager HSM against any liabilities arising from the High Court claim brought by his former business partners.
The lawsuit alleges Mercuriadis diverted the business of his former firm Hipgnosis Music Limited into his own operation, losing its investors millions of dollars in potential revenue.
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