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Guy Hands renews court fight with Citi over disastrous EMI deal

June 07, 2016 at 12:20 pm EDT

LONDON (Reuters) - Guy Hands renewed his legal pursuit of Citigroup over Terra Firma's [TERA.UL] failed takeover of music group EMI on Tuesday, claiming damages of 1.5 billion pounds ($2.18 billion) and alleging in a London court that the U.S. bank misled him.

Citigroup denies the allegations.

Terra Firma bought EMI for 2.4 billion pounds in 2007, when easily available credit fuelled a boom in huge private equity buyouts, but the deal soured when the music group's performance slumped and the financial crisis hit.

At the time of the acquisition, Citigroup advised the then publicly-listed EMI, home of artists including The Beatles, as well as providing financing to Terra Firma.

But when things went wrong at EMI following the Terra Firma takeover, the U.S. lender ended up taking control of it in 2011.

Hands tried unsuccessfully to sue Citigroup in the United States, but the case was terminated in 2014 and it is now being heard in London. A Citigroup spokesman said the Terra Firma case is "entirely without merit".

Terra Firma's lawyers told the High Court that the private equity house lost some 1.5 billion pounds ($2.2 billion), as well as additional lost profits, as a result of the failed deal.

The private equity group alleges that Citigroup misled it into overpaying for EMI. Terra Firma's case is focussed on a series of alleged "oral misrepresentations" by senior Citigroup bankers David Wormsley, Chad Leat and Michael Klein. All three men are being called as witnesses at the trial.

"Citi did not make any dishonest statements to Guy Hands or Terra Firma throughout the auction process for EMI and is confident the UK trial will confirm this," the Citigroup spokesman said.

Anthony Grabiner, the lawyer representing the private equity firm, said Citigroup had misled the fund into thinking there was another competitor in the EMI auction process, causing Terra Firma to overpay.

Grabiner also alleged Citigroup did not provide key information to the fund over EMI's creditworthiness.

Terra Firma said in documents presented to the court that a Citigroup employee had in a 2007 email described EMI as a "terminally ill cancer patient on chemotherapy".

Citigroup provided around 2.5 billion pounds of debt to Terra Firma for the 2007 takeover, helping it earn tens of millions of pounds in fees, Grabiner said.

(Editing by Alexander Smith)

By Freya Berry

Guy Hands

Guy Hands was educated at Ravenscroft Scool in Beckington and Judd Scholl Tonbridge. He was a student at Mansfield College, Oxford.

He began his career as a trader at Goldman Sachs in the early 1980s, and has left this position to Nomura in 1994 and made his fortune as CEO of the Principal Finance Group, with the purchase of a chain of a string of commercials UK.

Guy Hands has created the investment fund Terra Firma Capital Partners in 2002, derivative from Nomura.

Terra Firma started with $ 2.7 billion of private equity funds, and Guy Hands immediately made of Terra Firma one of the largest private equity firms in Europe.

Terra Firma has acquired a property portfolio in the UK and Germany (where they are the biggest owners of the country), but also of the former housing the Ministry of Defense and British service stations. He is also the largest owner of movie theaters in Europe, having taken control of United Cinemas International and Odeon Cinemas chain. Among other acquisitions, there is the Waste Recycling Group, a company that recycles wastewater.

Hands and his wife Julia are also owners of Hands Picked Hotels, a chain in 14 countries, managed by Julia.

In 2008, he had to confront to controversy about his management of EMI (acquired in 2007) when he decided to fire thousands of people to "rationalize" the organization and "maximize" resources. Robbie Williams has refused to publish his album on this label in order to protest. Other artists have expressed similar concerns.

In 2008, Julia and Guy Hands Hands had a fortune estimated at 250 million pounds. In 2005, the fortune was around 175 million pounds sterling, which made them the 281st richest people in the UK.

Terra Firma currently employs over 100 people. It is also the first investment company in the UK to have complied with the guidelines of David Walker (Morgan Stanley) about transparency.

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