Guy Hands: He went to Heaven's Gate, then he bought the world

He turned a Japanese bank into Britain's landlord. Now the arch-dealmaker is back with his own firm
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The Independent Online

There is a famous story about Guy Hands, the financier whose deals to buy Britain's trains, pubs, hotels, betting shops, soldiers' homes and (nearly) the Millennium Dome for the Japanese bank Nomura have made him a near-legend. It is 1980 in Oxford, where Hands is studying and sharing a house with a certain William Hague. The American film director Michael Cimino is over filming some scenes for his epic, Heaven's Gate, and Hands signs up as an extra. As the days wear on, he grows agitated over the arrogance of the film- makers and their apparent indifference to the misery of the extras being ordered around for hours on end. So he organises a strike for better conditions and pay. It is not known how much this contributed to the huge overspend on the movie that bankrupted the studio backing it. But it showed was that the impatient and forceful Hands was not someone to be trifled with.

Twenty-two years later, he is on a whirlwind tour of some 400 finan- cial institutions worldwide to raise enough cash to fund 50 Heaven's Gates. Last year Hands, 42, decided to leave Nomura after seven years in which he invested some £3.6bn of the bank's money in some £13bn of deals, bringing in £1.4bn of profits and pocketing more than £100m for himself. Nomura agreed to put €300m (£180m) towards the €3bn he is trying to raise for his new venture, Terra Firma Partners, and Hands is knocking on doors for the rest.

Last week he was in Japan, this weekend he is in Australia and next week back in the UK. It is just as well he can survive on four hours' sleep (an increase on the three hours he used to nap for before his wife expressed worries about his health).

To meet Guy Hands, you would not think he was one of the world's most successful bankers. A bear of a man, six feet tall and over 16 stone, his pudding-basin haircut and his fidgety, almost hyperactive demean- our are the antithesis of the cool, reserved image most City bankers try to project. He will often talk through an issue as if he is thinking out loud, and he'll talk across you. But he's not being rude, he's just impatient to make his point.

Part of this could be put down to his dyslexia, diagnosed when he was a schoolboy in Kent. He was an active child, working in a newsagent in Sevenoaks when he was 13, selling trinkets made out of pebbles when he was 14. He took up photography (winning a prize from The Birmingham Post), studied Buddhism and sold encyclopaedias and art. At Oxford he spent a lot of time avoiding writing essays while befriending the future leader of the Tories (who was Hands' best man when he married in 1984) and flirting with politics himself. After graduating with a third, the City beckoned and he became a bond trader at Goldman Sachs.

At the US investment bank, he felt a little out of place among the preppie New Yorkers. He says he kept his head down and worked hard, a familiar tale among Goldman folk. In his 10 years there he largely traded bonds and worked on the then-new technique of securitisation, where you secure a loan not on an asset, such as a building, but on a flow of income. All sorts of things have been securitised, from mortgage books to David Bowie's back catalogue.

After a few months working on this sort of financing, Hands had an idea: why not use the technique to buy boring businesses with strong cash flows that you could sell later when they came back into fashion.

He managed to put the plan in front of Jon Corzine, the head of Goldman, at a brief meeting in Phoenix airport. Corzine turned him down, so Hands decided to leave.

He pitched the project to a number of City institutions but only one bit: Nomura. Given a budget of £1bn a year, he started snapping up assets: an estate of pubs (Nomura is now the biggest landlord in Britain); the Ministry of Defence's estate of soldiers' homes (causing questions to be asked in the Commons); and the William Hill betting shop chain (which was sold to another City firm when it was clear Hands could not turn a good profit). His relationship with Nomura was helped no end when one of his first deals turned a huge return. Angel Trains, sold by British Rail before privatisation, was one of three rolling-stock firms than made 500 per cent profits for the investors lucky enough to buy them.

Within three years of creating Nomura's Principal Finance Group (PFG), Hands was a legend. His £40m salary and huge appetite for deals put him all over the press. Imitators of his financing style grew up: part of his team left to join Nikko, a rival Japanese bank, while WestLB, the German state finance house, is using his methods to try and buy up part of BT and Railtrack. Every City deal seemed to have his name on it. He nearly bought the Millennium Dome but pulled out just in time, and he was outbid for the Welsh utility group Hyder, though not before making a nice profit and embarrassing the Takeover Panel.

For Hands it was time to do something for himself. He invested in a small luxury hotels group, where he recently installed his wife as managing director, and is a backer of the controversial Rockingham motor racing circuit in Northamptonshire.

But this was not enough, and he decided to break from Nomura, taking some 70 executives with him. The Terra Firma prospectus, which has been knocking around the City in recent days, shows he has signed up for 10 years to the project and all staff are on four-year deals. Rivals have carped at his record. They point out that PFG has not performed as well as rivals such as Charterhouse, and that if you take away Angel Trains, the return on the portfolio is no more than average.

But this is water off a duck's back for Hands. He knows he is one of those rare things for a financier, his own brand. Terra Firma will spread its wings much wider than he did at Nomura: Germany is a key target, other lands will follow. Hands has to succeed. That is his life.