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The board of directors of the Hypnosis Songs Fund on Tuesday (January 23) filed two complaints against investment adviser Merck Mercuriadis-led Hypnosis Songs Management that cast doubt on the company’s ability to make competitive bids for assets. filed a complaint.
Shareholders have asked Hypnosis Songs Fund’s newly formed board of directors that the investment adviser’s call options, including the right to purchase the company’s catalog if the agreement is terminated with less than 12 months’ notice, are not available to the fund. It is believed that this will harm the company’s ability to receive competitive bidding. Those concerns led shareholders to reject a proposal by Hypnosis Songs Capital to acquire 29 catalogs for $440 million to help the company reduce its debt and boost its stock price with public funds. Hipgnosis Songs Capital is a joint venture of investment advisor and financial backer Blackstone.
Another issue raised by the board is that Hypnosis Songs Capital has the right to match competing offers to its $440 million bid. The matching right “acted as a deterrent to trusted third-party buyers who promised to cover due diligence costs,” the board said on Tuesday.
To attract more bids, the board wants to make the bidding process more financially attractive. On January 18, the board awarded prospective bidders £20 million to cover due diligence and acquisition costs as they seek to purchase the music assets of the Hypnosis Songs Fund, including songs by Neil Young and Shakira. announced a proposal to pay a fee of ($25.4 million). , Journey, and Red Hot Chili Peppers. Shareholders are due to vote on February 7 on a resolution to amend the company’s articles of association to allow for a £20m fee.
However, call options remain an issue. In a regulatory filing Tuesday, the board said the Blackstone-backed investment advisory firm “unconditionally removed call options from investment advisory agreements” because it “acts in the best interests of its shareholders as a whole.” ” announced that it refused to remove it. According to the Financial Times, Mr Mercuriadis intends to forfeit his call option if he is able to continue as investment manager on a multi-year contract. An investment advisor’s call option also applies if the company is liquidated or liquidated, or if the company’s investment objective undergoes a “material change” and the investment advisor is unable to fulfill its obligations under the investment advisory agreement.
The board filed another complaint against the investment adviser on Tuesday. Two independent research reports said the proposed sale’s 29 catalogs were “growing at a significantly higher percentage of the overall portfolio” and were “handpicked” for sale to Hypnosis Songs Capital. The board is investigating the veracity of the allegations and whether previous boards provided this information from Hipgnosis Songs Capital. The board did not name either party behind the report, but in December it hired Schott Tower Capital, an investment banking firm active in music catalog deals, to assist with strategic reviews.
Hypnosis Songs Fund shares fell 1.5% to £0.711 ($0.90) on Tuesday.
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