Two billion, two hundred and six million.
Approximate number of music business lunches since Hipgnosis Song Fund Already in 2018, people suggested Merck Asset has been overpaid.
Not exactly…that’s how it feels sometimes.
US$2.206 billion actually the amount spent in dollars Hipgnosis Song Fund – Via Mercuriadis – Table of contents to date, according to HSF’s latest interim report.
F HG (Through HSF’s long-term investment advisor, Hipgnosis song management) real Is spending too much on HSF-owned catalogs today?
We’ll fix this soon. First, let’s discuss why it becomes more appropriate than usual.
black stone Announced today (June 3), at the same time HSF The board said it had slightly increased its bid for HSF. (Technically, the bidder is Lyra Bidco Ltd.using funds managed by Blackstone.
beat out bids from a range of rivals harmonyBlackstone said it will now pay $1.31 Upon completion of the transaction, HSF will receive cash per share.
That’s 1 cent per share higher than Blackstone’s previous bid of $1.30. This increases the total cash paid by Blackstone for HSF assets Dollar $1.584 billion – increased $12 million Comparison with Blackstone before $1.572 billion bid.
Blackstone Latest cash offer shows confidence it will win broad approval from shareholders: Blackstone’s new model $1.584 billion Proposal is being converted to Plan and requires approval More than 75% HSF shareholders; only their prior takeover bid required 55% Agree.
Okay, then. Everything is clear, let’s get back to the topic Hipgnosis Song Fund Pay for its assets…and figure out if it’s worth it.
considering debt
First things first: new Dollar $1.584 billion Bid from black stone (i.e. HSF’s market recognized valuation) represents HSF’s stock value But it does not represent all of them Corporation value ——The entire value of the company’s assets.
The main reason for this is Corporation value (We’ll calculate that soon) takes into account HSF’s debt.
according to HSF The company’s most recent interim financial report showed that the company’s total debt was Dollar $674 million September 30, 2023. HSF.
Now. To calculate the enterprise value of a public company using the most typical method, the following equation must be followed:
- Market capitalization + total debt – cash = enterprise value (EV)
However, with Blackstone Now that the bid is publicly announced (and approved by the HSF Board of Directors), we can make adjustments:
- Blackstone – Value of Bid Shares + Total Debt – Cash = EV
The first part of this equation is very simple:
- $1.584 billion (Blackstone’s latest cash bid) + $674 million (HSF’s total debt as of September 30) = US$2.258 billion
From here we just need to subtract HSF’s cash reserves.
Again, our latest information on this topic comes from HSF’s latest interim report on 30 September 2023. HSF Financial data as of September 30.
Therefore: On September 30, HSF’s “cash and cash equivalents” weight was Dollar $34.3 million.
So let’s do this:
- US$2.258 billion (HSF equity value plus debt) – $34 million (Cash) = US$2.224 billion
Before we can come up with actionable EV data, though, there’s one more factor to consider.
In December, after the latest fiscal year, Hipgnosis Song Fund Sold 20,000 songs (which it called “non-core assets”) to a mysterious party believed to be Kobalt Music Group.
The cash transaction value is approx. $23 million.
Therefore, we must also subtract the proceeds from sales of this portfolio from total operations to obtain the most accurate EV possible:
- US$2.224 billion Equity value plus debt minus cash) – $23 million (non-core salt) = US$2.201 billion
What did HSF pay?
So… follow the best market test values HSF’s assets (i.e. a real-life takeover bidding war), we place Dollar US$2.201 billion Corporate valuations of UK listed funds.
As a reminder, this number is based on the standard EV metric combined with Blackstone The latest bids, plus the latest publicly available data HSF for debt and cash.
do you remember anything HSF Pay for these assets first?
According to its latest interim report, US$2.206 billion. (This is as of September 30, 2023, but takes into account the impending sale of non-core assets.)
As you can see, the amount High speed processing machine The assets paid are very close to the current enterprise value of those assets.
However, there is one more adjustment we need to make.
As close as possible to total catalog purchasing costs HSFwe need to briefly immerse ourselves in “right to income”, or RTI.
This accounting practice is in HSF caused some controversy (especially in shooting tower capital criticism of approach High speed processing machine Already used in HSF’s Estimated Revenue calculation).
However, this is the only way to reach the show RTI network HSF’s total acquisition spend data to date.
Conveniently, a table HSF Fiscal Year 2022 Report Provides us with a calculation model: “Pre-fiscal year” RTI For the company’s acquisitions from fiscal 2019 to fiscal 2022. (HSF has not made a major acquisition since the end of fiscal 2022.)
The total amount of these “pre-financial RTI” over the years is approximately $59 million (see below).
Change these amounts from HSF Total catalog costs, we get new approximate figures for HSF’s total net RTI catalog expenditures: US$2.147 billion.
In turn, this shows HSF Today’s corporate value (US$2.201 billion) is worth significantly more than the total amount the company has spent on acquisitions to date.
How you feel about this fact will undoubtedly depend on your position within the music industry (or outside it).
Some would argue that the value difference between the two HSF Today’s assets and their Cumulative cost It should be larger within the time frame (2018-2024).
Hipgnosis song management It could be argued that since HSF’s first prospectus in 2018 it has called for a long-term “Buy and hold” Investors’ strategies – even in the relatively high interest rate environment of the past two years – the true value of these assets has yet to emerge.
HSM may also believe that the value of high-quality, evergreen music assets will now soar again – because sonyReportedly considering purchase with assistance from financial partners queen’s The directory is located at Approximately US$1 billion Valuation.
Anyway, given Blackstone Newest $1.584 Billions in cash bids, these numbers illustrate something you don’t often hear in today’s ultra-competitive, acquisition-obsessed music industry:
Alleging huge cost overruns Hipgnosis Song Fundwhen you do the math, it sounds a little off.global music business
