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Terra Firma v Citigroup: Chocolate biscuit anyone?

By | Published on Thursday 21 October 2010

So, Gary, you remember with vivid detail the three phone conversations on which your entire lawsuit hangs, and the fact that you asked for chocolate biscuits as you planned your audacious bid for EMI back in 2007, but you can’t recall anything else about the meetings you had with your own team of executives in which you discussed a £4 billion deal? Isn’t that just a little bit odd?

Not my words, people. Well, yes, my words. My attempts to have the leader of equity firm and EMI owners Terra Firma rebranded as Gary ‘The Guy’ Hands haven’t really come to much. So those are my words, but what I mean is I am paraphrasing the arguments of Citigroup legal man Ted Wells – or “the banker’s Teddy” as I’m thinking of dubbing him – during day three of the Terra Firma v Citigroup litigation in the New York courts yesterday.

It was Hands’ second day on the witness stand and this time he was facing questions from the opposition.

They are trying to convince the jury that Gary is just a bitter old man pissed off that his remarkably good run of ‘buy it, revamp it, sell it at a profit’ acquisitions hit a brick wall when he bought EMI in 2007, costing him and his rich mates millions and leaving him saddled with a company worth half what he paid for it, with debts a billion more than he could sell it for, and which requires a hundred million a year in subsidy just to stop it breaching covenants on one bank loan. To be fair there’s a lot to be bitter about in that lot.

But, crucially, Citigroup argue that it is that bitterness that is behind Hands’ decision to sue his former allies in his big money deals, the bank to which EMI still owes three billion.

As previously reported, Terra Firma’s case against Citigroup relies on three phone calls that Gary claims took place between him and Citi’s top investment banker David ‘The Worm’ Wormsley over the weekend before the equity group made its over-the-odds offer to buy what was then EMI Group plc. Gary says The Worm misled him regards the intentions of a rival bidder, forcing him to bid quickly and at a relatively high offer price. Had Wormsley not been misleading, Hands says, he’d not have bid at that price, or possibly not at all.

Citigroup and Wormsley deny the phone calls took place. Terra Firma has already admitted that none of its own paperwork from the days leading up to their EMI offer, of which there is a lot, references these calls. With that in mind, Wells focused his questioning yesterday on just how certain Hands could really be that certain that these conversations had actually taken place, mainly by questioning him in some detail about other events that happened as Team Terra Firma planned their bid back in 2007.

Hands, as it turned out, had only a sketchy recall of the crucial weekend, remembering where he was (Guernsey), how close a plane was to the airport hangar where some of the discussions took place, and that at one point he had asked for chocolate biscuits. And, of course, that he had taken three phone calls from David Wormsley in which the banker lied about the intentions of a rival bidder. But Hands’ description of the rest of the proceedings were at best vague, and on at least one occasion contradictory. 

Wells: “The only thing you can remember is the conversation with David Wormsley and chocolate biscuits?”

Hands: “That is correct… in detail”.

Wells: “But when it comes to a meeting about putting up £4 billion, you don’t recall anything”.

Hands: “Going through 160 pages of a report is not memorable”.

The case continues.