Guy Hands, the billionaire financier, is plotting the sale of the Ministry of Defence’s (MoD) biggest landlord in what could be one of Britain’s biggest private equity deals of 2022.
Sky News has learnt that Mr Hands’ Terra Firma Capital Partners has begun talks with investment banks about overseeing an auction of Annington Homes.
City sources said this weekend that any deal could value Annington at more than £9bn, including debts of more than £4bn.
Annington says it has helped thousands of people including service personnel to purchase their own homes
At that level, it would result in one of the biggest paydays of Mr Hands’ long career.
The Terra Firma founder is thought to own roughly a third of Annington’s equity, meaning he could earn more than £1.5bn personally from a transaction.
Mr Hands has effectively turned Terra Firma – once one of Britain’s biggest private equity investors – into a family office after years of controversy which resulted in him losing control of the music giant EMI and then Four Seasons Health Care, a major player in the UK care homes sector.
People close to Mr Hands said the Annington process was “in preparation” but cautioned that a timetable and outcome remained uncertain.
Nevertheless, when it does take place, it would be the largest deal that he has presided over for years, even as Terra Firma’s stable of investments has been gradually dismantled.
Annington owns more than 40,000 homes, and describes its property portfolio as “unique in the privately rented sector”.
More than 95% of Annington’s portfolio is leased to the MoD on a 200-year contract
More than 95% of the portfolio is leased to the MoD on a 200-year contract, and the company says it has helped more than 17,000 people purchase their own home, with many of them first-time buyers, service personnel and key workers.
An auction of the company was expected to take place in the next couple of years, but has been accelerated by a settlement reached between Annington and the MoD ten days before Christmas.
In a stock exchange announcement issued by Annington Funding plc, it said that a deal on the rent payable by the MoD on the Married Quarters Estate meant a further arbitration process would not be required.
The company said the MoD would “continue to pay rent at the current prevailing downward adjustment of 58% from open market rental levels until the dates on which the new rents become payable, which fall between 2021 and 2024”.
“Upon these dates the MoD will pay rent with a downward adjustment of 49.6% from open market rental levels until the next Site Review.”
Annington added that the next Site Review due in 15 years’ time would adhere to the same rent payment formula, meaning that the next full review would not kick off until 2051.
The long-term visibility over Annington’s income is likely to appeal to infrastructure and pension funds, which could team up to bid for Annington.
Sources said the business could be sold as a single entity or broken into two separate chunks.
Terra Firma acquired Annington in 2012 from Nomura, the Japanese bank where Mr Hands previously worked on a series of pioneering deals, for a reported £3.2bn.
It was one of a string of property-related purchases that the tycoon has made, generating huge rewards for his family and, on many occasions, his external investors.
Despite his enormous wealth, he told The Daily Telegraph in a recent interview that he had found happiness an elusive commodity and said he had in part been driven by a need “to be accepted”.
Although his efforts to raise a new buyout fund faltered in the wake of the EMI debacle, where he unsuccessfully tried to sue Citi, the bank advising on the deal, Mr Hands has returned to the acquisition trail.
Last year, he bought Kier Living, which he has rebranded as Tilia, and Sky News revealed in November that he was planning a £300m bid for Hopkins Homes, East Anglia’s biggest private housebuilder.
Terra Firma and Annington both declined to comment this weekend.