Big Deal's catalog includes songwriters Teddy Geiger (Shawn Mendes, Niall Horan), Kamasi Washington, Gary Numan, Ross Golan (Selena Gomez, Ariana Grande), and Sleater-Kinney, among others, as well as joint venture deals with Ricky Reed (Lizzo, Jason Derulo) and Diplo's Mad Decent.
The acquisition also means Hipgnosis is now party to Big Deal’s many joint ventures, which include The Big Family, Reed's Nice Life, Mad Decent and the “And the Writer Is” podcast.
"Big Deal Music has become one of the most important boutique song companies in the world over the last 8 years," Mercuriadis said in the official announcement. "They identify exceptional songwriters at a very early stage, make a modest capital investment and then work hard to put them in rooms with the best established songwriters and artists in the world resulting in placements, hits and exceptional returns. This has resulted in a very attractive catalogue that complements our existing acquisitions perfectly."
MacPherson commented, "Collectively my partners and I have spent our careers identifying and nurturing some of the most iconic songwriters in contemporary music and creating value for our investors. Over the last 8 years at Big Deal Music my partners and I built a meaningful cultural legacy by assembling an incredible group of artists and label partners and world class songwriters. We look forward to bringing those creators and their enormous talent with us as we join Merck and his team at Hipgnosis."
The consideration for the acquisition is to be funded from the proceeds of Hipgnosis’ equity fundraise in July 2020 and through the issue of 17,609,304 new Ordinary Shares issued at a price of 120.65 pense per Ordinary Share (“Consideration Shares”). 6,248,351 of the Consideration Shares will be subject to lock up restrictions to Oct. 1 2020, with 10,123,219 Consideration Shares subject to lock up restrictions to April 1 2021, according to the Hipgnosis announcement.
So this means that the company is paying Big Deal owners an undisclosed amount from the £200 pound ($248 million) stock offering it did in July plus another 17.6 million shares, which are valued at 120.65 pense at the time of the deal. The stock component calculates to £21.245 million pounds ($27.6 million), but what the Big Deal owners ultimately get will be depending on when they sell and what share price Hipgnosis is trading at that time, so it could mean they will get more than $27.6 million, or even less. The lock-up period is until October 2020 for 6.248 milion shares and until April 1 for 10.123 million shares.
So at today prices, Big Deal owners are getting at least $27.6 million for selling the company, but what about the undisclosed cash component. Sources say that the cash component is even larger than the stock valuation, which means that Big Deal is selling for at least $55.2 million but likely higher than that.
Just the Latest In a Wave of Acquisitions
Big Deal is the latest -- and likely the largest -- in a long line of high-profile acquisitions by Hipgnosis, which has in the past two months acquired the catalogs (either outright or stakes in) of Wu-Tang Clan's RZA, Mötley Crüe's Nikki Sixx, Blondie, Barry Manilow, Dion "No I.D." Wilson and more.
Mercuriadis -- former manager for Beyonce, Elton John and Guns N' Roses -- founded Hipgnosis as a London-based publicly-traded music IP investment company in 2018. According to its annual report -- released in July -- for the fiscal year ending March 2020, Hipgnosis earned $81 million over the last year. It also announced then that it planned to raise £200m ($249 million) through sales of a new tranche of class C Shares, and cited over £1 billion ($1.3 billion) of acquisitions "in the pipeline."
Its catalog also includes songs by Benny Blanco (Justin Bieber, Selena Gomez), Jack Antonoff (Taylor Swift, Fun.), Johnny McDaid (Ed Sheeran, P!nk), Tom DeLonge (Blink-182), Richie Sambora (Bon Jovi), Mark Ronson ("Uptown Funk," Amy Winehouse) and more.
"I have always been clear that I believe we have an important responsibility with regard to our culturally important songs and the gold standard songwriters that have entrusted them to us," Mercuriadis said. "We shall now take what is the broken traditional music publishing model and replace it with our concept of Song Management where we nurture, love and get the most out of our songs by putting the most into them. Kenny and his team are enthusiastic about our Song Management philosophy and our mutual passion and expertise is a perfect storm when combined with our evergreen catalogue. This is an important move in the evolution of Hipgnosis Songs in our ability to deliver on the promise of Song Management not only globally but now in the heart of the world’s biggest music market."
In Hipgnosis' latest earnings report, Mercuriadis said its catalog of 13,000-plus songs earns "£4,868 per song vs something less than £150 per song for our competitors."
Hipgnosis Songs Fund Limited was represented in the acquisition by RBC Capital Markets, LLC, Herbert Smith Freehills, Fox Rothschilds, and Deloitte. Big Deal Music Group was represented in the transaction by Shot Tower Capital; Venable LLP; and Carroll Guido Groffman Cohen Bar & Karalian, LLP.
This article has been updated with additional information and official comments.