Terra Firma sues Citi over 'fraudulent' auction for EMI

US banking giant accused of lying during bid process for British music company

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.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee