Terra Firma sues Citi over 'fraudulent' auction for EMI
US banking giant accused of lying during bid process for British music company
Monday 14 December 2009
The American investment bank Citigroup has vowed to "vigorously defend" itself against the £1.5bn lawsuit filed by the private equity owner of EMI, following its troubled £4bn acquisition of the music group.
Terra Firm, the investment vehicle owned by the multi-millionaire British financier Guy Hands, has accused Citi of lying about another bidder being involved in the auction of EMI in 2007, which led the private equity firm to pay a "fraudulently inflated price" for the entertainment company.
In one of the most high-profile legal spats of recent years, Terra Firma claims Citi also wanted to drive EMI into, or to the brink of, insolvency so that it could engineer a merger with its rival Warner Music. Citi vehemently denied the allegations. A spokesman said: "The suit is without merit and neither Citi nor any of its bankers have done anything wrong here. We will defend against this law suit vigorously."
Neither Terra Firma nor EMI would comment last night.
Citi loaned Terra Firma £2.6bn to finance the EMI purchase in May 2007, which it completed that August. EMI, home to recording stars including Robbie Williams and Katy Perry, has been hit by the wider downturn in CD sales but has suffered some internal problems. It is reported that widespread cost-cutting at the company has left it with a lack of resources in some areas to handle its artists.
Three weeks ago, Terra Firma and its investors are thought to have offered to put an additional £1bn of equity into EMI, but it was conditional on Citi writing down the value of the loan by about £1.5bn. Citi is believed to have rejected the proposal.
In the legal claim in which Terra Firma is seeking compensation in lost equity, it claims Citi has earned £92.5m through multiple capacities on the deal. It said: "Despite garnering these proceeds, Citi, during the entire period from May 2007 continuing to the present, has recklessly disregarded Terra Firma's rights and interests in connection with the EMI transaction and has in the process harmed Terra Firma."
Terra Firma refers specifically to the role played by David Wormsley, the then head of UK investment banking at Citi, in the EMI deal. It accuses him of "misrepresenting" that there was another bidder, Cerberus Capital Management, involved in the auction. Mr Wormsley is accused of contacting Mr Hands shortly before, telling him he would miss out on the deal unless he made a bid of 265p a share by 9am on 21 May 2007. According to the legal papers, however, the Citi executive knew Cerberus had told EMI it was pulling out.
In the filing, Terra Firma says EMI tripled its earnings before interest, tax, depreciation and amortisation from 2008-9 and also improved its cashflow.
- 1 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Ball pool for adults opens in London
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 5 Rashida Jones speaks out against male-centric porn saying 'women should have sex and feel good about it'
Boris Johnson claims porn-obsessed Islamic jihadists are 'literally w*****s'
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Putin opponent reveals Russian President's daughter's secret identity
Ball pool for adults opens in London
Gay couple buy JebBushForPresident.com web domain, and refuse to sell
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
Greece elections: Syriza and EU on collision course after election win for left-wing party
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
King Abdullah dead: We can't afford not to hold Saudi Arabia's royals to account
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...