With CEI CEO On the Lam, Hicks Muse Ups Stake –

The presence of Hicks, Muse, Tate & Furst Inc. in the Latin American media industry has grown, thanks in part to a fugitive Argentine banker.

Last month, Hicks Muse increased its stake in CEI Citigroup Holdings, Argentina’s largest phone and cable operator, to land control of the company after Argentine authorities accused investment partner Raul Moneta of tax fraud. Moneta subsequently went on the lam.

In separate news, Hicks Muse last month also acquired a 49% stake in a Brazilian group that controls the broadcasting rights to regional soccer events, thereby furthering the firm’s efforts at profiting from the growth of soccer-related media in South America.

Partner Goes Into Hiding

In May, 1998, Hicks Muse paid $720 million for a 32.7% interest in CEI Citigroup. Banco Republica, which is controlled by Moneta, owned a 39% interest, making it the company’s largest shareholder. Citigroup Inc. controls the remaining shares, which it has agreed to divest by 2002. That same year, Moneta, a personal friend of Argentine president Carlos Menem, was named chief executive officer of CEI Citigroup, while Hicks Muse’s founding partner, Tom Hicks, was named vice president.

Trouble began last April when Argentina’s Central Bank shut down two Moneta-controlled banks-Banco Republica and Banco Mendoza-after regulators learned the banks did not have the required level of funds on deposit. A judge subsequently charged Moneta and nine others with tax evasion and “economic subversion.” In June, police raided Moneta’s home with an arrest warrant, but the CEO had disappeared.

The developments were not entirely bad for Hicks Muse. By keeping in contact with his associates, the firm was able to purchase from Moneta an additional 8% of CEI Citigroup for $125 million, giving the firm control of the company. The firm has said it is contemplating purchasing the rest of Moneta’s shares. In addition, Tom Hicks now is CEI Citigroup’s new CEO.

A source at Hicks Muse described the events as a “big mess,” but said Moneta’s problems, while sad, ultimately will not have a negative impact on the future of CEI Citigroup. He said the only decision the firm has left in the matter is whether to ask Moneta to step down from the board. This will only be done, he said, if Moneta is found guilty.

Moneta, for his part, has claimed through spokespersons that the charges are politically inspired.

Aggressive Soccer Play

More normal circumstances attended Hicks Muse’s investment in Traffic S.A., a Brazilian company that controls the rights to inter-regional soccer matches, including Copa America, the Mercosur Cup, and the World Cup qualifying tournament for Latin America. Traffic’s founder, Jose Hawilla, retains 51% of the company. Hicks Muse partners declined to disclose terms of the deal.

Traffic also has the right to broadcast games via pay-per-view to bars and restaurants throughout South and North America, according to Charles Tate, a founding partner at Hicks Muse.

Hicks Muse will use Traffic to acquire related broadcast rights and programming.

As was the case with its April acquisition of the franchise assets of Brazil’s Corinthians Paulista Soccer Club (BUYOUTS May 17, p. 7), Hicks Muse will use The Muller Sports Group as an operating partner on the Traffic deal.

“This [deal] is just another way for us to participate in the growing popularity of soccer in South America,” Tate said.