Guy Hands is back... and ready to buy
Guy Hands is back, scenting opportunities amid the chaos
THE Government’s approach to Brexit is, according to multi-billion pound investor Guy Hands, ‘ludicrously optimistic’. And some would say he should know ludicrous optimism when he sees it.
Hands was a towering figure in UK investment before the financial crisis. His private equity group Terra Firma Capital Partners bought and sold billions of pounds of businesses and assets, from bookmaker William Hill to vast swathes of military housing. Then in 2007 it all went spectacularly wrong.
When Terra Firma bought EMI, The Rolling Stones and Radiohead cut their links with the label. Then the credit crunch hit. The banks seized control and Hands ended up in an agonising legal battle with the bankers who had sold him EMI. He lost. And he now admits that at the time he feared the worst.
‘I thought by the time the crash was over there was a fair chance I would have lost everything,’ confesses the larger-than-life financier.
Now, after nursing his losses in exile on Guernsey – and failing twice in his court battle with bankers at Citigroup – Hands is back on the acquisition trail. This month he missed out on buying lingerie chain Agent Provocateur.
Hands thinks Brexit will create opportunities – but not the kind touted by No 10 – rather acquisition opportunities for people like him, especially if rising borrowing costs prompt a spate of bankruptcies.
And he predicts many low-paid workers will suffer as wages come under pressure. The view from his continental contacts is that the Government enters divorce negotiations ‘ludicrously optimistic’ he says, adding: ‘I think anyone who was telling the British public that Brexit can happen with short-term benefits is frankly delusional.’
Hands will try to avoid delusions of his own in Terra Firma’s latest sortie. At his side this time is Justin King, former head of Sainsbury’s, acting as adviser to the fund.
Terra Firma has €1billion to its name – mostly Hands’s own money – and is raising a new €3billion fund. It’s a lot, but back in 2007 he had amassed almost twice that sum from investors hoping to benefit from the Hands magic. He says: ‘In hindsight, the market was too hot. We should have sat on our hands.’
Some of his critics will believe in the new money when they see it. Hands argues he turned down the chance to raise capital until he had his house in order. The £1.75billion lost on EMI, including £150million of his own, is barely an issue any more, he says, adding: ‘Of over 200 investors, barely a handful even mention it now. For them and Terra Firma it’s over. We’ve all moved on.’
At one point during the EMI debacle, investors in that particular Terra Firma fund nursed a 70 per cent paper loss. After a series of disposals, including Odeon Cinemas, the fund should return 90 per cent of investors’ money.
‘It was emotionally important for me to show a profit, but I think realistically it is unlikely now,’ says Hands, 57, who has just won an extension from investors to wind up the fund by May next year.
Expect to see a slew of disposals, including RTR, an Italian solar venture, and Wyevale Garden Centres. A big unknown is Four Seasons Health Care, the nursing homes operator that was Terra Firma’s last big acquisition in 2012.
Hit by the crisis in social care – caused by belt-tightening on the part of councils, the rise in the minimum wage raising staff costs, and patients simply getting older and so more expensive to care for – its finances are under strain and a debt-for-equity swap looms.
Ever the optimist, Hands thinks he won’t lose control of Four Seasons, saying: ‘I think we’ll find a solution. I have confidence in the business and would put more money in.’
From the Government, he would like to see a solution for the elderly that co-ordinates home care, hospitals and nursing homes. He says: ‘Hospital wards are full of longterm patients with disabilities who logically should be in a nursing home. But homes don’t get enough money to look after them.’
Hands also struck an eye-catching deal with McDonald’s earlier this year to become licensee for the fast food group across the Nordic countries. Instead of committing Terra Firma funds, he used family money as he envisaged a 20-year deal, which is longer than the traditional private equity investment.
Hands was quizzed by McDonald’s 11 times during the year-long process, and his hotelier wife Julia six times. His son will be involved too. Hands says: ‘I felt I was 20 again, going for my first job interview.’
Leaving a legacy is on Hands’ mind. We are sat in the principal’s well-appointed parlour at his alma mater – Mansfield College, Oxford – picking over a plate of dainty finger sandwiches as construction work clanks in the background.
The Hands Building, to which the tycoon and his wife have donated £2.2million so far, will house new student lodgings and a human rights institute when it is finished.
‘You can’t take money with you when you die and I’m lucky in being able to support causes close to my heart,’ says Hands. Quite a change for a man who feared he would lose everything ten years ago.
Having started as a Goldman Sachs bond trader, Hands moved to Japanese Bank Nomura, where he became known as a high-rolling maverick, even hatching an abortive scheme to buy the Millennium Dome and turn it into a Beatles theme Park.
In 2002 he spun out the principal finance group from Nomura to create Terra Firma. Life became more frenetic after 2004, when the size of the deals meant Hands’s team lacked the ability to examine the details of everything they bought.
In the old days, they would have visited every hotel in a chain they wanted to buy, but when InterContinental Hotels Group appeared on his radar in 2006, it was too large.
With EMI, Hands improved financial performance of the firm, but drove out talent. The label also struggled as the high-margin market for CDs declined. Keeping up with interest payments on £3.4billion of debt became impossible.
Hands, argues, however that such excesses were common in private equity at the time. He says: ‘Pretty much every major fund in 2007 had an EMI. The difference was Terra Firma put in its own money, while most others brought in lots of other people. Beyond that there is no real difference except we chose to try and save the business.’
When he retreated to Guernsey in 2009, he was exhausted.
‘People said I left because tax rates were going up,’ he says. ‘First, I’m not clairvoyant. Second, I didn’t think I would have any tax to pay.’
He says this, despite telling a US court during the EMI case: ‘My reasons were partly based on a desire to reduce my tax burden.’
Now, it seems, Hands feels the benefit was more pastoral. He says: ‘The great thing about Guernsey was nobody knew me. I could walk on the cliffs and recover. I had to get away to move forward.’
As he prepares to reload with funds, he has reloaded with people. Hands says he has much in common with King – ‘we both have big egos’ – but Terra Firma’s third musketeer, ex-Citigroup banker Andrew Geczy, adds caution to the line-up.
Demonstrating that his rollercoaster decade has left a lasting impression, Hands invokes Churchill: ‘Those that fail to learn from history are doomed to repeat it.’
Don’t expect this dealmaker to face the music again.
You can’t take cash with you when you die and I’m lucky to back causes close to my heart
The great thing about Guernsey was nobody knew me – I could walk on the cliffs and recover