Bruno Mars-rights holder Round Hill Music Royalty Fund set to be sold

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Round Hill Music Royalty Fund, the UK-listed company that owns the rights to music from artists such as Bruno Mars and Bonnie Tyler, is set to be acquired by Los Angeles-based Alchemy Copyrights for $469mn.

Alchemy, the music rights owner that trades as Concord, has offered $1.15 in cash per scheme share, representing a premium of about 67 per cent to the stock’s closing price on Thursday. 

Shares in Round Hill Music have slumped since its initial public offering given inflation and the rise in interest rates, which led to a higher discount rate used to calculate the present value of expected future cash flows of the investment trust.

Round Hill Music’s portfolio comprises 51 catalogues with a collection of more than 150,000 songs, including Backstreet Boys’ “I Want It That Way”. Other artists include Alice In Chains, Louis Armstrong, The Supremes, Wilson Pickett and Whitesnake.

The deal represents a discount to its net asset value of 11.5 per cent, but investors still welcomed it given the share price performance since its IPO in November 2020.

Shares in rival song rights owner Hipgnosis Songs Fund also rose 12 per cent on Friday following the deal announcement.

“Alchemy is paying a full and fair price for Round Hill Music, which validates the thesis that there are buyers for music rights and the independent valuation is about right,” says Caspar Rock, chief investment officer at Cazenove Capital, which owns about 10 per cent of Round Hill and 6 per cent of Hipgnosis.

“In the past there was a lot of skepticism around the discount rate applied by the independent valuers of Round Hill and Hipgnosis,” he said.

The company’s board has recommended that shareholders vote in favour of the deal. Robert Naylor, chairman of RHM, said that the board saw this as an opportunity “for liquidity at a premium to both the share price and the IPO price, as well as at a narrow discount to economic net asset value per share”.

Shareholders representing about a third of the issued share capital, including Josh Gruss, chief executive of the company’s investment manager, have provided either irrevocable undertakings or letters of intent to vote in favour of accepting the offer. 

AJ Bell said that “Round Hill Music Royalty Fund floated on the stock market close to the peak of the hype in music investments. Its share price traded sideways for a year and a half, and then went into freefall as interest rates shot up.”

The stockbroker added: “Shareholders have the opportunity to get out at a price higher than the shares have ever traded since listing. That is a relief to them, but hardly chimes with the expectations for the company at the time of its listing in 2020.”