Investor AVI asks shareholders to vote against Hipgnosis catalogue sale

Hipgnosis shareholder Asset Value Investors told shareholders on Monday that they should vote against the company’s planned $465m sale of some of its catalogues to a partnership between its investment adviser and funds advised by Blackstone.

The music rights owner announced the deal last month, saying that the proceeds would allow it to fund a share buyback programme and reduce debt. The transaction includes the sale of a portfolio of 29 music catalogues for $440m and a portfolio of non-core songs for around $25m.

But AVI said in a letter to shareholders that it was planning to vote against the deal at the upcoming annual general meeting - where votes will be held on the planned disposal and the company’s continuation - and asked them to do the same.

The continuation vote and disposal are conditional upon each other, meaning that shareholders can only vote for the sale and continuation or neither.

AVI said that over the last few weeks, it has spoken with a majority of the share register and that not one of those shareholders was in favour of an immediate sale of the portfolio, yet it believes many will vote against continuation.

"We urge undecided shareholders not to be swayed by a misleading narrative that a failure to pass the continuation resolution results in a wind-up of the company or a fire sale of assets. Voting against continuation should not be perceived as a negative stance to take," AVI said, adding that it remains "excited by the prospects for the company’s assets".

"Given the depth of opposition to the proposed transaction and the near certainty that it is voted down, we do not intend to discuss the details of it exhaustively here. We simply re-iterate that the inherent conflicts in a sale to a related party, the uncompetitive nature of the process given the restrictive terms of the Go-Shop provision, and the lack of an up-to date valuation or proper fair-and-reasonableness opinion, make it unlikely this will be the best deal for shareholders."

AVI, which has a 5% stake in Hipgnosis, said that in time, and "against a more accommodating market backdrop", a sale of part of the portfolio or the company "may well be judged to be in the best interests of all shareholders".

"But that must be a decision made by a newly reconstituted board of directors, following extensive consultations with shareholders."

At 1320 BST, the shares were down 10.6% at 66.02p, having tumbled earlier in the day after the company said it was scrapping its interim dividend as it now expects lower payments from its US catalogue.