Hicks Muse directors give $500m vow

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The Independent Online

The partners of Hicks, Muse, Tate & Furst, the US venture capitalist, have made an unprecedented pledge to hand over $500m (£350m) of their own money to investors if they fail to perform.

The partners of Hicks, Muse, Tate & Furst, the US venture capitalist, have made an unprecedented pledge to hand over $500m (£350m) of their own money to investors if they fail to perform.

The guarantee follows a series of disappointing bets which Hicks Muse made this year in technology start-ups. It has been designed to shore up the confidence of investors who have subscribed to a new $200m fund earmarked for hi-tech ventures. Hicks Muse is best known in the UK for last year's £537m acquisition of Hillsdown Holdings, the Buxted chickens and Typhoo tea- maker, which remains the UK's largest-ever private equity transaction.

The eight Hicks Muse partners who've made the guarantee may have to cough up $500m in a worst-case scenario that would see the $200m of investments rendered worthless, but investors still given a 20 per cent annual return for five years. One British venture capitalist was anxious to dispel the notion the pledge could become standard industry practice. "This is a Hicks Muse problem," he said. "There is no way we would ever do something like this."

Thomas Hicks, the Hicks Muse chairman, said: "It's a tough fund-raising environment. There are a number of firms in the market at the same time. There are more than I've ever seen before."

He admitted some investors had been put off by the bad publicity surrounding some of Hicks Muse's investments. Its apparent difficulties have stemmed in particular from the recent collapse of telecoms stocks, brought about by mounting fears about the debts many them have run up. Some of Hicks Muse's own bets in the sector, notably ICG Communications, have also turned sour.

Apart from Hillsdown, Hicks Muse has acquired several UK food producers. Two weeks ago, the Independent on Sunday revealed the venture capitalist had won the race for Burton's Biscuits, the maker of Wagon Wheels, put up for sale by Associated British Foods.

But if any venture capitalists can afford to underwrite their investors' risk it is Hicks Muse, one of the industry's biggest and most prolific players. The individual wealth of venture capitalists is a closely guarded secret but, in the case of Hicks Muse's partners is likely to run well into nine figures. In the UK, various industry figures are thought to have built up vast personal fortunes. Its most famous exponents are Jon Moulton, managing partner of Alchemy, who narrowly failed to acquire the Rover car group this year, and Nomura's Guy Hands, who has bought and sold assets as diverse as betting shops, pubs and railway rolling stock.

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