Terra Firma closes €5.4 billion fund

Guy Hands’ buyout firm Terra Firma has closed its third fund at €5.4 billion ($7.28 billion).

This is Terra Firma’s second fund as an independent entity. The firm’s previous fund raised €2.1 billion.

The fund has attracted investors such as US bank Citi, European fund of funds AlpInvest Partners and insurer Standard Life.  Terra Firma and its team have also committed €200 million to the fund. 

This month it was revealed Blackstone’s executives were handsomely rewarded for contributing a similar proportion to their fourth fund, investing $150 million to the $6.45 billion (€4.8 billion) fund. Blackstone executives received a payout this year of $3 billion, 20 times their original investment.

Despite the prospect of such heady returns, the extent of the celebrations for Terra Firma’s latest successful fundraising effort could depend on the next move of Warner Music, the buyout firm’s main rival to acquire music group EMI.

Warner is considering a bid for EMI, although it will not take part in a consortium to buy the company, according to UK newspaper The Guardian.

However, a market source told PEO last week: “If Warner does make a bid, shareholders will want a sizeable premium because the deal will be heavily regulated and may fall through – which leaves Terra Firma in quite a strong position.”

The market still appears to be awaiting a rival offer for EMI. The company’s share price was up one penny to £2.77 at 1404 GMT today, significantly above Terra Firma’s £2.65 offer.

Former EMI chief executive Jim Fifield is also expected to submit an offer, after issuing a statement last week saying he was still interested in bidding for the company. Rival buyout firms Cerberus, One Equity and Fortress are also interested in derailing Terra Firma’s agreed deal, according to The Guardian.

Terra Firma has had an eventful year while it has been marketing its fund to investors. Its dramatic attempt to trump US buyout firm Kohlberg Kravis Roberts’ agreed deal for Alliance Boots may have ended in failure, but it certainly succeeded in grabbing headlines. The firm also made the relatively discreet but sizeable acquisition of airplane hire company Pegasus for $5.2 billion (€3.9 billion) earlier this month.  

Terra Firma’s successful fundraising comes after it was revealed that rival fund Apax Partners is set to raise a record €11.17 billion European fund, while Permira recently raised a €11.1 billion fund.