The City dealmaker best-known for a bitter legal tussle over the fate of EMI, the music company, is to raise his first takeover fund for a decade following the recruitment of a new leadership team.
Sky News has learnt that Terra Firma Capital Partners, which was founded by Guy Hands, will next week begin talks with prospective investors about raising about €3bn for a new buyout fund.
If successfully completed, the move will mark a stunning return to the mainstream private equity industry for Mr Hands, who in recent years has relied on backers to fund acquisitions on a deal-by-deal basis.
The precise size of the new equity pool has yet to be determined and could end up being more or less than €3bn, according to one insider.
The plan for a new fund underlines the tycoon’s confidence that the recruitment of Justin King, the former J Sainsbury boss, and Andrew Geczy, a former Lloyds Banking Group executive, has rehabilitated Terra Firma’s reputation.
Mr Hands has been aided by handsome returns generated on earlier Terra Firma investments, including Infinis, a waste recycling business, and Tank & Rast, a German motorway concessions operator.
Nevertheless, his move to attract billions of pounds for a new buyout fund – which will allow him to use the capital and borrowed money to fund a string of big takeovers – will mark another milestone in Mr Hands’ career.
The firm’s most recent general fund, TFCP III, was closed in May 2007, raising €5.4bn.
Among Terra Firma’s current investments are Wyevale, the garden centres operator, and Four Seasons Health Care, the nursing home operator, which has improved its operating performance amid concerns about the industry backdrop and its capital structure.
Sources said that the addition of Mr King and Mr Geczy had persuaded Mr Hands that a more diverse leadership team could again compete with the giants of the private equity sector.
Mr King has been widely praised for the turnaround of Sainsbury’s that he oversaw during a decade in which it recovered some of the ground it had lost to rivals Tesco and Asda.
Earlier this week, Terra Firma announced a £4bn refinancing of Annington Homes, a residential property owner, in a deal which included £550m of new equity from existing investors.
Mr Hands has also raised money for individual deals including the purchase of McDonald’s Nordic master franchise of 435 restaurants and Welcome Hotels in Germany.
It is the ill-fated debt-laden takeover of EMI in 2007 that Mr Hands has been most closely associated with for the last decade, however.
Despite success in terms of profit growth, the financial crisis and strained relations with Citigroup, EMI’s biggest lender, meant that Terra Firma was unable to refinance its debt.
The Wall Street bank eventually seized control of the British music group, sparking a bitter legal battle lasting more than five years.
Mr Hands abandoned the fight last year, saying that the passage of time had impaired his memory of events.
A Terra Firma spokesman declined to comment on Thursday.
Source: SKY News