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Court blocks Terra Firma’s attempts to obtain documents relating to Citigroup’s EMI grab

By | Published on Wednesday 11 January 2012


Private equity set up and one time EMI owner Terra Firma has failed in its bid to force PricewaterhouseCoopers to hand over documents relating to the winding up of the music major’s holding company last January, the move than enabled US bank Citigroup to take control of the London-based music company off the equity firm, and put it up for sale.

As previously reported, Terra Firma has questioned the decisions made by PWC that enabled Citigroup to repossess EMI, and also thrown doubt on the accountants’ valuation of the music business at the time the equity company lost control. Last September Team Terra Firma went to court in a bid to get access to confidential documentation that would throw some light on exactly what happened late last January, and how PWC valued EMI at that point.

According to the Financial Times, legal reps for Terra Firma chief Guy Hands also allege that PWC was not validly appointed as administrator for the EMI holding company, that the way that holding company was wound up was specifically designed to “crystallise a loss by Terra Firma of the entirety of its investment of about £1.85bn”, and that there were “serious concerns about the circumstances surrounding the sale [of EMI to Citigroup] by the joint administrators”.

It’s thought that Hands and his team were as surprised as the rest of us about the speed with which Citigroup swooped to seize control of EMI at start of February last year. Of course, with the hugely indebted (to Citi) EMI needing ever more subsidy, and with Terra Firma’s financial backers seemingly losing patience with the music company during 2010, and with Hands having totally fallen out with Citi chiefs making renegotiating EMI’s loans impossible, the repossession was probably inevitable. But insiders say that Terra Firma bosses reckon the way Citi took over was underhand, and designed to screw them over.

Legal efforts to see those crucial PWC documents presumably suggest Hands is considering also legal action over the way Citi behaved at the end of his EMI adventure (he having already unsuccessfully sued the bank over the way it behaved when he first acquired the music company in 2007).

But if that is planned, such litigation will have to go ahead without Terra Firma having the PWC paperwork in hand, because judge Nicholas Warren has ruled that there is no case to force the accountancy firm to hand over any documents at this time, partly because there isn’t “the slightest suggestion [Citi] effected sales at undervalue” because it wouldn’t make commercial sense for them to do so, and partly because he didn’t see why PWC handing over documentation would “assist in achieving a fair disposal of the anticipated proceedings”.

It remains to be seen what action Terra Firma now takes regarding Citigroup’s actions over EMI this time last year. Meanwhile, EMI itself, of course, is due to be split up into its recordings and publishing parts and sold to Universal Music and Sony/ATV respectively, assuming Citigroup’s plans to sell the music major in that way gets regulator approval.