Guy Hands grabs care home group in £825m deal

The purchase of Four Seasons marks a comeback for the Terra Firma boss following his debacle over record label EMI

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 £3.2m in 2007 and lost all that money, has just purchased Britain's biggest care homes group, Four Seasons, for up to £825m.

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 Mr Hands' second major purchase in a month after his private equity firm bought the Garden Centre Group for £276m. Last year, he pulled off another significant acquisition when he bought Italian solar energy business RTR for €264m (£215m).

Mr 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 Mr 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 Mr Hands wants to minimise risk at all costs.

The Four Seasons deal looks reasonably attractive, even if it has already provoked the ire of the unions.

The care homes group is a classic tale of the credit crunch – not unlike EMI. Qatari-backed investment firm Three Delta bought Four Seasons for £1.4bn in 2006 but its finances collapsed under the weight of its debt and Royal Bank of Scotland seized control.

Now RBS, which has since written off a huge amount of Four Seasons' debt, has off-loaded it to Terra Firma, while keeping a minority stake for the bank in a debt-for-equity swap.

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

Mr 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 No 1 priority is to ensure that Four Seasons delivers consistent, high-quality care and peace of mind for residents," he declared.

The problem for Mr Hands, whose best man at his wedding was Tory Foreign Secretary William Hague, 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."

Mr Hands insists that 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.

However, no one should be fooled into thinking that just because Mr Hands has been able to go on the acquisition trail that he has been using new money. He is buying Four Seasons with some of the €5.4bn that was raised by the Terra Firma III fund way back in 2007. His private equity firm has not launched another fund since.

There is a widespread belief in the City that Mr Hands would struggle to raise another fund, prompting reports that he might look to sovereign wealth for his next round of investment. The Terra Firma camp plays down such talk.

Those close to Mr Hands do acknowledge that he has to do things differently. Never again will Terra Firma invest as much as 30 per cent of one fund in a single investment. Now the maximum is closer to 15 per cent.

Mr Hands remains a figure of fascination because he has enjoyed both great highs and lows.

In a speech to private equity conference Super Return in February, he insisted that people work in the sector because "they love transforming businesses, not just making money". But the truth is that money matters a great deal to Mr Hands, who has been a tax exile in Guernsey since 2009.

Friends say he has no intention of returning, which means that he won't be able to visit any Four Seasons care home, because they all based in the UK.

It takes a certain kind of investor to want to buy something without ever having face-to-face contact with their new purchase. No wonder some people remain wary about how much Mr Hands really cares.

Troubled: Equity link

Private equity has a troubled history with the care home sector.

When Southern Cross collapsed at the end of last year, industry insiders blamed its demise on Blackstone, the buyout giant that heavily leveraged the care group, and set up a sale and leaseback business model.

The Priory, the mental health and addiction clinic operator, was sold by RBS to private equity house Advent International last January.

Advent also bought Craegmoor, which cares for more than 3,000 elderly adults and people with mental health problems, in 2008.

Lucy Tobin

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent