Equity boss drops rock for care homes

It is about as far away from rock 'n' roll as you can get.

Guy Hands, the Terra Firma private equity boss who bought record label EMI for £3.2 billion in 2007 and lost all that money, has just purchased Britain's biggest care homes group, Four Seasons, for up to £825 million.

Some might assume Terra Firma investors would have - pardon the pun - washed their hands of him after the EMI saga and his legal defeat against his lenders Citigroup in 2010.

But his Terra Firma III fund, which lost fully 30 per cent of its cash on the ill-fated EMI purchase, is behind the Four Seasons deal.

This is Hands' second major purchase in a month after his private equity firm bought the Garden Centre Group for £276 million.

Last year, he pulled off another significant acquisition when he bought Italian solar energy business RTR for €264 million ($428 million).

Hands, who set up Terra Firma in 2002, is determined to make a comeback - even if he has a long way to go before he can restore his reputation.

"Terra Firma's track record has been hugely hit by EMI," admitted a source close to Hands. "But if you took out EMI, Terra Firma's track record is as good as anybody's."

That's a reference to the private equity firm's portfolio which includes decent businesses ranging from Odeon Cinemas to renewable energy. Add in care homes and garden centres and it's apparent that Hands wants to minimise risk at all costs.

The Four Seasons deal looks reasonably attractive.

The private sector has a decidedly mixed record when it comes to investing in care homes, after a string of collapses.

Hands says he is "committed to further investment" in Four Seasons, which owns 445 care homes and 61 specialist care centres around the UK.

"Our No1 priority is to ensure that Four Seasons delivers consistent, high-quality care and peace of mind for residents," he declared.

The problem for Hands is that his reputation precedes him. Union leaders have already raised fears about cuts at Four Seasons.

Justin Bowden, GMB national officer for care staff, has demanded reassurance from both Terra Firma and ministers that there will be "no risk of another EMI-style debacle".

He added: "Residents, their families and staff will want to know how the financial numbers stack up and how the unsustainable debts get refinanced."

Hands insists Four Seasons has "a stable capital structure and clear ownership", and he notes the purchase has been backed by Goldman Sachs and RBS, who have arranged the debt.

Hands has been able to go on the acquisition trail by using old money.

He is buying Four Seasons with some of the €5.4 billion that was raised by the Terra Firma III fund in 2007. His private equity firm has not launched another fund since.

- Independent