Forstmann teams with former HBO head for $250m media fund

Private equity legend Ted Forstmann is returning to active investment, after winding down his own firm in 2004. He is raising a $250 million media and entertainment fund with Chris Albrecht, formerly the head of HBO.

Former HBO chairman and chief executive Chris Albrecht and private equity veteran Ted Forstmann are currently raising a $250 million (€180 million) fund to target investments in media and entertainment content.

Albrecht has joined as head of global media business for talent agency and media company IMG, owned by Forstmann’s private equity firm, Forstmann Little. He has also become a special limited partner in Forstmann's firm.

“Together, we can leverage IMG’s expertise, portfolio of assets, and established international content distribution organization to capitalize on the enormous global opportunioties in traditional and digital media,” Albrecht said in a statement.

Albrecht and Forstmann are currently in the process of signing letters of commitment with their backers, said a source familiar with the matter. The fund's LPs will likely include “big strategic investors” including major media companies.

Albrecht is credited for the development of hits such as “The Sopranos” and “Sex and the City”, and is largely thought to be responsible for HBO's current status as a premier creator of original television content.

He recently left his post at HBO after he was arrested in May for assaulting his girlfriend in the MGM Grand parking lot in Las Vegas. After the Las Vegas incident, it came to light that in 1991 he paid $400,000 to a female employee who accused him of choking her.

Ted Forstmann founded Forstmann Little & Co. in 1978. He became one of Wall Street's most prominent figures: his 1988 bidding war for RJR Nabisco was the subject of the book Barbarians at the Gate. His firm has invested in Gulfstream Aerospace, the jet plane maker, Revlon, the cosmetics business, and Dr Pepper, soft drinks manufacturer, among others.

But in 1999, Forstmann backed two telecom companies, XO Communications and McLeodUSA, which both subsequently collapsed, costing Forstmann Little more than $2 billion. In 2004 on behalf of Forstmann Little's investors, the Connecticut Pension Fund sued the firm for losing $125 million of the pension fund's money in these investments. The court convicted the firm of acting “with gross negligence, in bad faith or with willful misconduct” and ordered the firm to pay the pension fund $15 million.

In October 2004, Forstmann announced that he planned to wind down his firm. The firm still holds three companies in its portfolio: IMG, gym chain 24-hour fitness and radio broadcaster Citadel Broadcasting Corp.