Terra Firma Said to Have Held Talks on Electra Fund Tie-Up

  • Talks began after Electra asked Terra Firma to invest in deal
  • Kennedy and Miholich said to have departed Terra Firma

Guy Hands, co-founder of investment firm Terra Firma Capital Partners, has held talks with Electra Partners about a possible partnership to create a new pool for private equity deals, people with knowledge of the matter said.

Hands, 57, proposed providing an anchor investment for a new fund that Electra’s team would raise, said the people, who asked not to be identified because the information is private. Hands would have demanded more than the industry-standard 20 percent share of the new venture’s profits if the partnership had gone ahead, the people said.

Electra has held talks with a number of firms in search of new capital, including Terra Firma, which is how the discussions with Hands’s company started, the people said. There are no current discussions about a possible partnership, the people said. A spokeswoman for Terra Firma declined to comment.

Terra Firma and Electra “had brief discussions some time ago regarding a specific investment opportunity. However, the talks were quickly discontinued and did not lead to any activity,” Electra said in an e-mailed statement. “TF subsequently approached EP about investing in EP more generally. After consideration, EP declined this potential offer.”

Electra managing partner Alex Fortescue is in need of new backers after Electra Private Equity Plc, an investment trust that had historically allowed Electra to manage its capital, pulled out of the partnership. The trust served notice to terminate its contract with the private equity fund manager in May as part of a strategic review, leaving Electra with fewer resources to deploy.

The partnership could have provided Terra Firma with a new vehicle for investments after nearly nine years without raising a dedicated buyout fund. Hands postponed plans to raise a new pool of capital for leveraged buyouts from investors in February 2015, and said he would instead invest 1 billion euros ($1.1 billion) of Terra Firma’s own capital into individual deals.

Management Shakeup

Terra Firma entertained the talks as the company’s management went through an upheaval.

Iain Kennedy agreed to join Terra Firma this summer as head of private equity, leaving a job at the investment arm of Ontario Teachers’ Pension Plan. By September the new job was eliminated.

Peter Miholich, managing director of the TF Support Capital Fund debt unit, has also left the firm after joining last year, the people said. That business is being reviewed on concerns that the deals were too risky relative to the firm’s target of generating a 20 percent return, the people said.

Kennedy declined to comment. Miholich didn’t immediately respond to call and a message requesting comment sent via LinkedIn.

The company has also replaced its chief executive officer this year, appointing Andrew Geczy to the role after Tim Pryce stepped down in March. Justin King joined as head of the portfolio business last year and Dominic Spiri was promoted to chief financial officer.

Investment Losses

In September, Terra Firma hired Andrew Miller, the former head of Guardian Media Group Plc, as a managing director with a mandate to improve the operation of the firm’s portfolio businesses.

Terra Firma lost billions on an investment in music publisher EMI Group Ltd., which was seized by lenders in 2011. The fund also contains exposure to U.K. care-homes operator Four Seasons Health Care Ltd., which is currently undergoing a debt restructuring.