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Guy Hands Steps out of Terra Firma CEO Role

boardroom montageFor seven years, since the inception of the firm (via a spinoff), Guy Hands has been Terra Firma’s outspoken leader.  Today, in a surprise announcement the fund founder ceded day to day control of the large European private equity firm. General Counsel Tim Pryce will become CEO and Hands will take the dual title of Group Chairman and Chief Investment Officer.

Terra Firma characterized the move as an operational decision necessitated by the growth of the company.  Since, 2002, staff numbers have nearly doubled and the company’s assets under management have swelled from €2 billion to more than €11 billion.

The company currently has more than 200 investor relationships spread across twenty six countries.

As Group Chairman and Chief Investment Officer Hands will be better positioned to focus on the company’s investments, investors and strategic development, the company says.

That perspective corresponds with a letter earlier this month in which Hands said the firm was “cautiously optimistic” about investment prospects for the coming year and that the deals it is “currently seeing are classic Terra Firma opportunities.”

At the same time, however, the reorganization also seems to be a conciliatory gesture  aimed at appeasing investors who have been concerned over both Terra Firma’s ownership of record label EMI and the €1.39 b loss Terra Forma posted for 2008, largely a result of that investment. 

emi performance sm metueTerra Firma bought the “Big 4” record label in 2007 for approximately €2.6 billion (2.4b pounds or about $4.89 billion at August 2007 rates) with a plan to trim costs and better position the label for the digital world.  The staffing cuts and narrower focus on select profitable artists has helped push earnings (EBIDTA) but interest owed Citigroup on loans has offset any gains to cash flow.  (Declines in CD sales, which NPD recently reported were off 19% in the US for 2008 has not helped either).

A month back, in its annual review Terra Firma took a permanent impairment charge of 1.37 billion euros.   That write-off revalued EMI at about half the original purchase price.

With reports of more than €2.5b in capital still available for investment, the management shakeup seems to be a way of telling investors, however symbolically, the firm remains on track and Guy Hands is….well, "hands on." 

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