In a statement today (2 February), the investment adviser to London-listed Hipgnosis Songs Fund (SONG) said Ben Katovsky, currently HSM’s president and chief operating officer, will replace Mercuriadis as CEO.
HSM said it had requested the board of SONG to approve the planned transition “as a matter of prudence”.
As chair, Mercuriadis will continue to “devote the majority of his time” to HSM, the firm said, which will involve leading engagement with songwriters, artists and the music industry, and generate opportunities to increase consumption and enhance the value of its portfolio.
Hipgnosis tables proposal to offer up to £20m to prospective acquisition bidders
Meanwhile, Katovsky, who joined HSM in 2022 and has two decades’ experience working in the music industry, will assume responsibility for the executive management of the business.
“One of our most important goals has been to bring an institutional rigor to Hipgnosis Song Management,” Mercuriadis said.
“Over the last 16 months, Ben has done an amazing job building the team and HSM’s capabilities to deliver the best possible service to our clients and I am certain this appointment makes us stronger.”
Katovsky added he hopes the firm will be able to “work constructively” with the new directors at SONG, arguing that HSM is “best able to deliver value for their shareholders”.
Qasim Abbas, senior managing director at Blackstone Tactical Opportunities, added he is looking forward to working with Mercuriadis as chair, who he described as a “great business partner”, and described Katovsky as an “impressive leader”.
Blackstone owns a majority stake in HSM as part of a partnership launched in 2021.
Hipgnosis rejects board’s request to scrap ‘material conflict of interest’ call option
“Our partnership with HSM is testament to our conviction in the long-term value we see in songs as an asset class, and we are excited about the future,” Abbas added.
Frictions between HSM and the refreshed board at SONG have intensified in recent months after Mercuriadis’ firm refused to give up its call option, which gives it the right to purchase the portfolio if and when its agreement with the fund is terminated.
According to the board, the option is a “structural conflict between the interests of our shareholders and the investment adviser” and a deterrent to potential bidders.
Moreover, the board has questioned the portfolio valuations, and last month confirmed it was investigating whether the 29 catalogues proposed in a sale to Blackstone-owned Hipgnosis Songs Capital, also managed by HSM, were “cherry picked”.
Hipgnosis results delay sheds light on frictions between manager and revamped board
In a research note, Stifel analyst Sachin Saggar said that, a few months ago, there may have been a window where the stepping back of Mercuriadis could be sufficient to appease investors and allow HSM to continue being the investment adviser of the listed fund.
However, he said the broker’s engagement with shareholders since suggests that is “unlikely to be a palatable option today”. Instead, he argued there are likely to be two remaining scenarios.
“Either the portfolio is sold in the short term, but that appears unlikely given the issues that need to be resolved and that there is unlikely enough ‘juice’ for investors from a sale,” he said. “Or, our base case is that the trust continues for some time and in this scenario, shareholders will be looking for a re-rating of the share price.
“With the current IA in place, that seems unlikely given high levels of coverage in the press that has made this ‘toxic’. Hence, we think if shareholders will be invested for some time it will require a full rebrand and refresh.”
Read the full article here
