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Terra Firma bails on its EMI dispute with Citigroup

By | Published on Monday 13 June 2016


Private equity firm Terra Firma sensationally abandoned its long running lawsuit against Citigroup in relation to its 2007 acquisition of EMI on Friday. It brought the very final chapter of the former British music major to a very sudden close indeed.

As previously reported, Terra Firma and its boss man Guy Hands had long claimed that the bankers at Citigroup misled them ahead of their 2007 deal to buy EMI. Citi was working for both EMI and Terra Firma at the time, and provided a mega-loan to help fund the acquisition.

Terra Firma said Citi execs provided misleading information about the state of the music company and the intention of another bidder, resulting in the equity firm bidding too soon and too high for the EMI business.

The debt-saddled acquisition went horribly wrong when the credit crunch meant EMI’s mega-debts couldn’t be restructured. Citigroup eventually repossessed the music company, resulting in big losses for Terra Firma and Hands (and, argued the bankers, Citigroup too).

Terra Firma first sued Citigroup over the allegedly misleading information it received in the New York courts in 2010 and lost. But a retrial was called because some specifics of English law were incorrectly handled during that hearing. That retrial got underway in the London courts last Tuesday.

In both court hearings, Citigroup’s lawyers argued that Guy Hands had strangely clear recollections of the bad advice he claimed to have received from Citi, yet a pretty hazy memory about everything else to do with the big EMI deal. On top of that, last week the Terra Firma chief was accused of inconsistencies between his 2010 and 2016 testimonies.

Hands denied all of those allegations last week, but then on Thursday – according to the Financial Times – the legal team repping Terra Firma approached lawyers working for Citigroup about calling the whole thing off. Then on Friday Hands basically admitted that his side’s evidence just wasn’t strong enough.

After a special meeting in court on Friday to bring the long-running litigation to a prompt end, Hands told reporters: “These claims were brought in good faith. However, it has become evident that our documentation of the fast-moving and complex events, and memories of these events after nine years, are no longer sufficient to meet the high demands of proof required for a fraud claim in court”.

Calling the whole show off four days in is no cheap decision for Hands, who was trying to claw back some of his past EMI losses with the lawsuit. Terra Firma will now also have to cover all their own legal costs plus those of Citigroup, which could run into millions.

“The matter is now closed”, Hands went on, confirming that he is now finally putting his music industry adventure behind him. “Terra Firma is looking to the future. We have an exciting portfolio of companies, a talented and experienced team, supportive and loyal investors and one billion euros of capital to invest”.

Needless to say, Citigroup relished the development, feeling it vindicated both the bank and its bankers. “We have always maintained that the allegations made by Terra Firma are entirely baseless”, it said. “And that Citi, specifically David Wormsley, Michael Klein and Chad Leat, acted at all times with absolute honesty and professional integrity throughout the EMI transaction”.

And that’s it ladies and gentlemen. It’s truly over. We need never write about the Terra Firma twonks ever again. Well, unless I get around to writing ‘The Bold And Bloody Death Of EMI: The Opera’.