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Terra Firma v Citigroup: The Guy takes to the stand

By | Published on Wednesday 20 October 2010

The boss of private equity firm and EMI owners Terra Firma – that Guy Hands fella – took to the stand in a New York court yesterday to personally present his allegations against Citigroup, the bank who advised on and provided the funds for his audacious takeover of EMI in 2007.

It was day two of the much previously reported Terra Firma v Citigroup trial. Other than him telling us that he’s a father of four and that he’d overcome severe dyslexia to get a place at Oxford University, most of what Hands shared with the court room repeated what his lawyer had said the day before. That Citigroup and its top advisor David Wormsley had told him, just before he bid for EMI, that a rival equity group was about to make a bid and that he should therefore offer more money, 265p per share.

Prior to being given that information by Wormsley, Hands claimed, he’d been trying to persuade EMI’s investment bankers to accept a lower bid, hoping he would ultimately get to bid unopposed. “If [Wormsley] hadn’t made those statements [about a rival bidder]”, he told the court, “we wouldn’t have been bidding on the Monday morning at all”.

Citigroup denies providing Hands with that information, claiming that the Terra Firma chief is simply suing them and his former good friend Wormsley because he’s pissed off his ambitious takeover of EMI has proved to be disastrous and, rather than delivering the great return on investment he’d hoped for, has in fact cost him and his financial backers millions. Hands himself told the court he thought the value of EMI was now £1.8 billion, less than half what he paid for it, and a good billion less than the money the music firm still owes Citigroup as a result of his takeover deal.

Asked about his decision to sue his former allies in the world of big business takeovers – Citi and Wormsley – the Hands man told the court, according to the Financial Times: “To sue someone who is a friend and who you’ve worked with successfully is difficult [but] I came to the conclusion we had no alternative. It was a very, very last resort”. Hands, of course, went legal after Citigroup refused to restructure EMI’s three billion bank loan. Terra Firma wanted the bank to knock about a billion off what was owed.

As well as denying that Wormsley ever told Hands that a rival equity house, Cerberus, was on the verge of bidding, Citigroup are also trying to rubbish the suggestion that Terra Firma based its offer of 265p per EMI plc share entirely on two or three phone conversations. Before Hands took to the stand yesterday, reps for the bank showed the court Terra Firma papers that discussed Cerberus’s intentions and the plan to bid 265p before the weekend the crucial conversations between Hands and Wormsley are meant to have taken place.

Another Terra Firma exec, meanwhile, admitted that despite having presented millions of pages of documentation to the court for the trial, none of the papers from the time of the deal mention the conversations that Hands now claims were at the very heart of his offer to buy EMI.

The case continues.