Few months old this but some good info at the end.
Tom Hicks beginning a new chapter in his business life
08:35 PM CDT on Sunday, May 30, 2010
By GARY JACOBSON and BRENDAN CASE / The Dallas Morning News
gjacobson@dallasnews.com
bcase@dallasnews.com
His reputation badly bruised by his debt-laden sports teams, Tom Hicks is beginning a new chapter in his business life at an age when many think about retiring.
Colleagues say the 64-year-old private-equity pioneer hasn't lost any zest for the acquisition game. Indeed, in recent years, he put together multimillion-dollar deals in energy, technology and health care.
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And, after a short drought, more deals are in the works, he said in a wide-ranging interview with The Dallas Morning News.
"This year, we're back on offense," said Hicks, flanked by two of his sons at a conference table in his offices at the Crescent in Uptown Dallas.
He said he expects to close on a "sizable" buyout of a consumer-products firm this summer. He's also exploring the creation of a second special-purpose acquisition company – a "blank-check" company in which investors essentially bet on a management team's deal-making ability.
His first special-purpose company combined with an energy firm last year, generating paper gains of more than $100 million so far for Hicks and his key employees.
Within the next two years, he also could initiate a public stock offering for a specialty steel company he bought in 2006.
Amid those successes, he's still trying to extricate himself from his troubled pro sports business, a process that is becoming increasingly costly in reputation and money.
The Texas Rangers filed for Chapter 11 bankruptcy last week, hoping to expedite a sale to a group led by Pittsburgh attorney Chuck Greenberg and Rangers president Nolan Ryan. Angry creditors, who say they should be getting more money, are fighting the move.
Hicks also is in a legal battle with a former partner and vendors over the failed Glorypark project, once envisioned as a sprawling development including restaurants, retail and office space near Rangers Ballpark in Arlington and Cowboys Stadium.
Efforts to sell the Dallas Stars and the Liverpool F.C. soccer team are progressing, Hicks said. He expects to lose a "couple hundred million" dollars on the Rangers and Stars but make it back on Liverpool, although estimates of the soccer team's worth range widely.
If fans of his U.S. teams are angry at his stewardship, Liverpool supporters are absolutely livid. They have organized protest marches, threatened a ticket boycott and accused Hicks and co-owner George Gillett of ruining their team because they saddled it with debt.
"Get out of our club, You lying b*stards," one Liverpool loyalist wrote in an online comment to a recent story in The News.
Hicks said he once didn't mind the high-profile glare that comes with team ownership. But now he is tired of it, especially the abuse. "I've had all the publicity I want to have," he said. "I want some privacy for my family."
Boom and bust
Those following Hicks' problems with his sports teams might think he has lost his investing touch.
Not so, says Dallas developer Harlan Crow, son of the late Trammell Crow.
"My family continues to invest with Tom, so I wouldn't agree with that characterization," Crow said.
Whatever else, Hicks is resilient. Over three decades of business cycles, he has been declared a buyout genius as well as a bust. In 2002, D Magazine ran a cover story asking, "Is Tom Hicks Going Broke?" In 2006, BusinessWeek declared that Hicks, the dealmaker, was back.
One adviser described Hicks early in his buyout career as a smart guy who got things done with his wits, bluffing and poker-playing. His style hasn't changed much, the adviser said.
Hicks grew up partly in Dallas and partly in Port Arthur, where he spun records in the 1960s as a teenage disc jockey at his father's radio station. He said he was a big fan of the Beatles and Bee Gees.
Educated at the University of Texas at Austin and the University of Southern California's business school, Hicks began his career with stints as a venture capital executive in New York and Dallas.
Then came his transition from financial executive to buyout artist. He minted his first fortune in the 1980s with partner Robert Haas, using a "buy and build" approach in which two or more companies would be combined into a more valuable whole.
In perhaps their most celebrated deal, they assembled the pieces of what would become Dr Pepper/Seven Up Cos., which later sold for $2.5 billion.
"With Hicks & Haas, that's one of the all-time best-performing buyout funds ever," said Steven Kaplan, a University of Chicago professor who follows the private-equity business.
Hicks did it again in the 1990s, at least for a while. With another group of partners, he led Hicks, Muse, Tate & Furst Inc. to the upper echelons of the private-equity world, raising more than $12 billion from investors and closing more than $50 billion of leveraged acquisitions.
He also made missteps. The firm lost about $1 billion of its investors' money by buying into telecom and Internet companies shortly before markets peaked in 2000. Hicks took another blow in Argentina, when the firm's investments soured amid a 2001-02 economic crisis there.
"Hicks Muse had a few good funds, but it turned out to be too big," Kaplan said. "They did some deals that were off strategy."
'A lot of fun'
Now Hicks is exiting the sports business, but you wouldn't know it walking into his firm's offices. The lobby features piles of books on baseball and hockey.
A replica of the Stanley Cup stands in front of a photograph of a jubilant Hicks posing with Dallas Stars players after their 1999 championship. Another photo shows Rangers players dousing the team owner with beer after they won a division title.
"The whole sports investment in the U.S. has been a lot of fun," he said. "It hasn't been a successful financial investment."
He never exited the private-equity business. After leaving Hicks Muse, he launched Hicks Holdings LLC in early 2005 and later that year began a flurry of deals before world markets went into freefall in 2008.
There was a North Texas liquid crystal display maker, a Pennsylvania specialty steelmaker and a San Diego data analysis company that may be poised to cash in on the nation's need to deliver better medical care for less.
The Rangers sale includes about 150 acres around the Ballpark, but even after that, Hicks will continue to control potentially valuable real estate there. He has land in Frisco and Cedar Park (near Austin), plus substantial acreage in Argentina, where he is developing residential and resort projects and maybe even a winery someday.
He has sold his stake in the W Dallas project, but still holds a small share of the W Hollywood development in Los Angeles . He remains proud of his role in developing American Airlines Center, one of the most successful sports arenas in the country.
"It's changed the whole personality of downtown Dallas, Uptown," he said.
Last year, he pulled off a major deal, engineered largely on the strength of his name. It began in October 2007, when Hicks Acquisition Company I raised about $550 million in a public offering. The company had two years to acquire or merge with another company, or otherwise dissolve.
A deal for a packaging company, announced in mid-2008, fell apart with the world markets later that year. Then, just before the dissolution date last September, Hicks Acquisition merged with a Colorado oil company to form Resolute Energy. Talks began over the Fourth of July weekend and the deal closed Sept. 25.
As the economy has improved, Resolute's stock price has increased, bolstering Hicks' gains.
Now, he's on the prowl for more deals, he said.
"You want to invest in times when good prices can be obtained," he said. "This is one of the better times we've seen right now. Our motto around the firm is, 'We want to shoot fish in a barrel.' We think this environment is good."
For years, Hicks pursued a high-risk, high-reward business model that paid off during an era of easy credit. His biggest successes – and failures – were built on mountains of debt.
Those days of easy credit and high leverage are gone, he acknowledges. But he says he and his investing team, which includes sons Tommy and Mack, have learned to play by new rules.
Dary Stone of Cousins Properties, a longtime Hicks adviser, acknowledged that the commercial real estate industry is on hold for the near future. But Hicks' real estate holdings are "stable and not under stress," largely because they "don't have much leverage," Stone said.
The Argentine businesses, including a pet food and animal feed company called Grupo Pilar, with $60 million in annual revenue, have little debt.
"And if we do borrow, it's in local currencies," Tommy Hicks said.
The elder Hicks – who lives in what's considered Dallas' most expensive home, a $41 million compound on 25 acres on Walnut Hill Lane – said he has largely avoided making personal guarantees for business loans. He said he's personally on the hook for only about $80 million in Liverpool F.C. debt.
Stepping back from private-equity megadeals and professional sports ownership may leave more room for family. Hicks is eager to talk about how closely he's working with Tommy and Mack, who are both veterans of New York financial firms. He insisted on having his photograph for this story taken only with them.
His third son works for the Rangers, while his fourth son is in the Navy's officer candidate school. His fifth son is about to enter Princeton University and his sixth child, a daughter, is in high school. She can drive a golf ball farther than he can, he says.
He downsized from a Gulfstream V to a more economical Gulfstream IV a few years ago, and Tommy and Mack say they fly on American Airlines when they go to Argentina. With a net worth estimated by a Forbes editor at $900 million to $950 million, Hicks dropped off the magazine's list of billionaires earlier this year.
"I'm not sure I ever should have been on," he said.
HICKS' BUSINESS LIFE CYCLE 1984: Tom Hicks co-founds Hicks & Haas Inc. with Robert Haas. Their signature deals include A&W Brands, Dr Pepper/Seven Up Cos. and Thermadyne Corp. Hicks and Haas later split up.
1989: Hicks co-founds what would become Hicks Muse Tate & Furst Inc. Over the next 15 years, its signature deals include Capstar Broadcasting, Chancellor Media, Pinnacle Foods, Triton Energy and a significant stake in Clear Channel Communications.
1996: Hicks buys the Dallas Stars for $84 million. The Stars win the Stanley Cup in 1999.
1998: Hicks buys the Texas Rangers for $250 million. Two years later, he signs superstar Alex Rodriguez to a landmark 10-year, $252 million deal.
2002: After Hicks Muse's Internet, telecom and Latin American investments lose big, D Magazine runs a story headlined: "Is Tom Hicks Going Broke?" The infamous cover illustration shows Hicks with empty hands outstretched and his pockets turned inside out. It isn't really Hicks in the picture.
2004: Hicks says he will leave Hicks Muse to spend more time with his family and teams.
2005: Hicks forms Hicks Holdings LLC. Its first acquisition is Ocular LCD Inc.
2006:
•Hicks Holdings launches Glorypark, a 75-acre urban town center adjacent to Rangers Ballpark in Arlington; forms a company to provide bundled TV, voice, data, security and other services to apartment complexes; acquires Greatwide Logistics Services for $730 million (it owns about 20 percent) and Latrobe Specialty Steel Co. in a deal valued at $250 million (it invests $16 million for a 51 percent stake).
•BusinessWeek magazine declares that Hicks, the dealmaker, is back.
2007:
•Hicks and George Gillett acquire the Liverpool F.C. soccer team in a deal equivalent to about $430 million at the time. The team's debt quickly escalates.
•Hicks Acquisition Company I raises $550 million in an initial public offering, making it the largest IPO of its kind.
2008:
•Hicks Sports Group retains advisers to assist with restructuring or selling the Rangers.
•Greatwide Logistics Services files Chapter 11 bankruptcy.
March 2009: Hicks stops making interest-only payments on $525 million in loans related to the Rangers and Stars as he renegotiates the teams' debt.
April 2009: Hicks sells the Mesquite Championship Rodeo after a decade of ownership.
January 2010:
•Hicks sells his three-acre Aspen estate for $18.5 million.
•Hicks Sports Group reaches agreement to sell the Rangers to a group headed by Pittsburgh attorney Chuck Greenberg and Nolan Ryan.
April: Hicks and Gillett announce they're trying to sell Liverpool F.C. Hicks says the team is worth $860 million to $1.15 billion at current exchange rates. Other estimates are much lower.
May: The Rangers file prepackaged bankruptcy in an effort to speed the sale to the Greenberg-Ryan group. The filing indicates the team still owes A-Rod nearly $25 million in deferred compensation.
RECENT DEALS Tom Hicks has made numerous deals since forming Hicks Holdings LLC in 2005. Among them:
OCULAR LCD INC.: In late 2005, Hicks Holdings bought a majority stake in Ocular, a North Texas maker of liquid crystal displays. Christina Weaver Vest, a Hicks partner in equity ventures, said Ocular grew "very strongly" in 2009 and is poised to grow again this year.
GREATWIDE LOGISTICS SERVICES: At the end of 2006, Hicks Holdings made what turned out to be a mistake when it teamed with Investcorp to buy Dallas-based Greatwide for $730 million. The trucking company declared bankruptcy when the economy tanked in 2008, making Hicks Holdings' 20 percent stake worthless. Hicks and his investors probably lost between $20 million and $30 million, one Hicks adviser says. Greatwide exited bankruptcy in 2009 with new owners.
LATROBE SPECIALTY STEEL CO.: In late 2006, Hicks Holdings and a Massachusetts firm bought Latrobe for $215 million in cash plus about $35 million in assumed liabilities. Hicks put in $16 million in equity for 51 percent of the Latrobe, Pa.-based company, which serves aerospace customers and other specialty markets. In the first nine months of 2006, it brought in $42 million in earnings before interest and taxes, on sales of $266 million. In a cyclical industry, Hicks said Latrobe was especially hurt by the economic crash in 2008. But that's past and the company has invested $50 million in new capacity and is growing, Hicks said. "I think it will likely be a public company in the next two years," he said.
GAMMALOY HOLDINGS LP: In April 2007, Hicks sold oilfield equipment rental company Gammaloy Holdings LP to National Oilwell Varco Inc. He got nearly $200 million after acquiring Gammaloy from his wife's family in the 1990s and building it up through investment and other acquisitions.
ANVITA HEALTH: In June 2007, Hicks Holdings acquired a 40 percent stake in San Diego-based SafeMed Inc., which is now called Anvita Health. The company offers data analysis designed to foster better, more cost-effective medical care. Hicks said Anvita has global potential and is translating some of its software into Chinese for one client. Hicks Holdings has increased its stake slightly, Vest said.
Gary Jacobson and Brendan Case
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