Hipgnosis shareholders reject $440 million music catalogues sale

By Eva Mathews and Aby Jose Koilparambil

(Reuters) -Shareholders of Hipgnosis voted against the music royalties fund's proposed $440 million deal to sell 29 catalogues on Thursday in the latest setback to the company that has faced an investor backlash.

Hipgnosis will in addition need to put forward proposals to reorganise or wind up the company within six months, as the annual general meeting also did not pass a resolution on business continuation.

Merck Mercuriadis, who has managed bands including Guns N' Roses and artists such as Elton John, founded Hipgnosis in 2018, dazzling investors with a steady source of income on royalties from streaming and performances.

High interest rates have since pushed up the discount rate used to calculate future asset values, reducing song right valuations and angering investors over governance and a widening gap between asset values and the company's share price.

To try to raise cash, cut its debt and bolster its stock price, Hipgnosis announced a deal last month, to sell 29 music catalogues, including songs by pop star Shakira and rapper Nelly, to a private Blackstone vehicle.

The $465 million price tag includes $440 million for the 29 catalogues and another $25 million for some non-core songs.

Shareholders have opposed the deal citing the lack of an "up-to-date" valuation.

At Thursday's meeting, shareholders also voted against re-electing Andrew Sutch as chair, although the executive had already announced his intention to step down. Hipgnosis said it was advanced in the process of appointing a new chair to oversee the strategic review it announced last week.

Non-executive directors Andrew Wilkinson and Paul Burger also resigned on Wednesday following calls for a leadership overhaul.

"Shareholders have spoken and sent a clear message that the status quo is unacceptable and that a total reset is required," Asset Value Investors, a top ten shareholder in the company with a 5% stake said.

"We look forward to a refreshed board working closely with shareholders to turn the company around."

Shares in Hipgnosis were up 2% in afternoon trade.

(Reporting by Aby Jose Koilparambil and Eva Mathews in Bengaluru; Editing by Nivedita Bhattacharjee, Shinjini Ganguli and Barbara Lewis)