Tom Hicks: Why he walked away from Clear Channel

Steve Rosenbush

Buyout pioneer Thomas O. Hicks specializes in smaller deals, which he says can be at least as profitable as bigger LBOs that dominate the headlines. On Dec. 8, his Hicks Holdings teamed up with The Watermill Group, a private equity firm in Lexington, Mass., to acquire Latrobe Specialty Steel Co., of Latrobe, Penn., for $215 million in cash and $35 million in assumed debt. The company sells steel to civilian and military aircraft makers. On Dec. 6, Hicks and Investcorp bought trucking services Greatwide Logistics Services for $730 millon. Greatwide, of Dallas, manages transportation and warehouse operations for big clients such as Wal-Mart.

Hicks says he expects to generate returns of 30% or more on his recent investments. In some cases, he expects to made four to eight times the amount of his invested capital. That can be more profitable than some larger deals. Earlier this year, Hicks and group of investors that included Blackstone, KKR and others walked away from a bidding war for radio and advertising company Clear Channel Communications. Thomas H. Lee and Bain Capital Partners ended up buying Clear Channel for $18.7 billion and the assumption of $8 billion in debt. “The Clear Channel deal came down to who was willing to accept the lowest equity return. I think they are looking at a return in the high teens,” Hicks says.