- Hasn’t raised buyout fund since losing investment in EMI
- Founder Hands joined by new CEO, head of portfolio businesses
- Firms exiting legacy portfolio, investing deal by deal
Terra Firma Capital Partners is targeting $3.42 billion for its sixth fund, according to a filing with the SEC.
This would be the firm’s first buyout fund since it lost a court battle concerning its 2007 purchase of EMI, which ended in the loss of Terra Firma’s entire investment.
Terra Firma Founder and Chief Investment Officer Guy Hands said he personally lost around 200 million euros ($236 million), according to media reports. Since that time, Hands has invested on a deal-by-deal basis, using mostly his own money. One such transaction was McDonald’s Corp’s sale of its restaurants in Denmark, Norway, Finland and Sweden to Hands in January of this year.
A spokesperson for Terra Firma declined to comment on fundraising.
The firm previously raised three flagship funds, as well as two funds established to acquire housing assets. Terra Firma Capital Partners III closed in May 2007 with a total of 5.4 billion euros in commitments. Fund III was generating a negative 10.9 percent internal rate of return as of Dec. 31, 2016, performance information from Oregon Public Employees Retirement Fund shows.
Fund II, which closed in February 2004 with 2.1 billion euros, was producing a 14.24 IRR and a 1.87x as of June 30, 2016, according to North Carolina Retirement System.
The firm’s first fund included assets acquired between 1994 and 2002, when Hands ran a European private equity operation at the Japanese bank Nomura Holdings. Terra Firma’s investment strategy targets asset-rich companies in complex, often regulated sectors, mostly in Europe.
The Guernsey-based firm also revamped its leadership team, adding ex-Citigroup banker Andrew Géczy as chief executive, as well as Justin King, formerly CEO of Sainsbury’s, as vice chairman and head of portfolio businesses.
In March, Hands told the Daily Mail he expected to return 90 percent of investors’ money from Terra Firma Capital Partners III, the fund that invested in EMI. “It was emotionally important for me to show a profit, but I think realistically it is unlikely now,” Hands said.
“In hindsight, the market was too hot,” Hands told the Mail, looking back on 2007. “We should have sat on our hands.”
Action Item: Terra Firma’s Form ADV: http://bit.ly/2vKUyZn
Terra Firma CEO Guy Hands (center) arrives for a meeting in London on Jan. 15, 2008. Photo courtesy Reuters/Kieran Doherty