Talking with Tom Hicks

I spent some time on the phone yesterday with Tom Hicks, who burst back onto the buyout scene this week by agreeing to take Graham Packaging public via his SPAC. The deal is valued at $3.2 billion, with Graham owner Blackstone Group agreeing to remain the company’s largest single shareholder for at least two years. Some quick hits from the conversation:

* Hicks sized the SPAC last year at $480 million, which he thought would let it do deals of between $500 million and $1 billion. Since then, however, he’s learned that the SPAC market prefers deals closer to 3x or 4x the SPAC size, which is why he began looking at larger targets. Graham is even beyond that range, but he seems confident that his investors will approve.

* He expects to raise another SPAC once Graham closes.

* Hicks is not too concerned about how macro economic conditions will affect Graham, even though much of its business is for products that would appear affected by shrinking pocketbooks (Vitamin Water, for example). He does, however, acknowledge that there will be a downturn in sales at gas stations, since folks are less likely to spend money at the mini-mart after paying more than $4 per gallon.

* I asked why Blackstone would want to commit to two more years, after having been in Graham for 10 years. He answered that Graham was a good buy and build platform, but had never really functioned properly until it got new senior management in late 2006. In Hicks’ words: “It’s just the fourth inning of a new game, and they don’t want to stop playing yet.”

* That said, Hicks acknowledged that Blackstone had to get at least some liquidity (even delayed) for Graham after so much time, and that it probably would have found another way had the SPAC not come along.

* He’s still an investor in his namesake LBO firm HM Capital Partners: “I think they have a great group of younger partners, and it’s their turn now. They’re doing niche mid-market deals, which was the hallmark of Hicks Muse and where we had our best success.”