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Terra Firma v Citigroup: It’s all in the scribbles

By | Published on Friday 22 October 2010

So, two of Guy Hands’ colleagues took to the witness stand yesterday on day four of the Terra Firma v Citigroup trial, Hands himself having a day off from the interrogations.

As previously reported, earlier this week the tax-phobic equity chief personally stated his allegations that senior Citigroup advisor David Wormsley had called him three times over the weekend before Terra Firma made its audacious bid to buy EMI in 2007. On each occasion, Hands alleges, the banker told him that a rival equity group called Cerberus was about to bid for the flagging music company at 262p per share. Hands, Wormsley advised, should bid quickly and higher.

Citigroup, which denies any such phone calls took place, has made much of the fact that these three crucial conversations are not referred to in any of Terra Firma’s own documentation from the time of the deal. The bank’s lawyer also expressed surprise that Hands’ recollections of the weekend before he made his big £4 billion bid for EMI are rather vague, apart from when it comes to the three phone calls at the heart of the court case.

Backing up their boss man yesterday were Riaz Punja, Terra Firma’s due diligence man on the EMI deal, and Kirsten Randell, a compliance assistant who took minutes of meetings that took place over the crucial weekend.

Punja revealed that Team Terra Firma internally referred to their bid for EMI as Project Dice, named after The Rolling Stones song ‘Tumbling Dice’, the Stones being the one EMI band other than The Beatles that the tedious money men had probably heard of. The Stones, of course, quickly moved their label dealings to Universal Music after Terra Firma took over at EMI.

According to Bloomberg, Punja backed up his boss’s testimony yesterday, telling the court: “Guy called me up over the weekend and he said, ‘I’ve just had a conversation with David Wormsley and he tells me that Cerberus is in. They will be bidding tomorrow, and they will be bidding a price of 262′”.

Meanwhile, Randall showed the court some of her notes from that all important weekend. Alas they didn’t mention Wormsley’s phone calls or Cerberus’s interest, but there was a key line that read “other bidders – one at 262”. That, Team Terra Firma reckon, is proof that Hands had been given reliable advice that a rival bidder was still in the frame and they would have to offer more than 262p per share to be in with a chance of winning.

Citigroup’s legal men questioned exactly what that one line of scribble meant. Did it mean Terra Firma knew there were other bidders of which one would offer 262p, or did it mean Terra Firma knew for certain there was just one other bidder who was offering that sum? Was the dash performing the task of a question mark? Did that mean other dashes on the page should be read as question marks as well?

As far as I could see it was a pretty pointless little debate – who uses punctuation consistently when scribbling down notes by hand? And either way, it seems clear Team Terra Firma were, at that point, pretty sure there was a serious rival bidder going to offer 262p, which may have hastened and heightened their own bid. But as to whether that impression was the result of the alleged Wormsley phone chats, the hand written note doesn’t really help one way or the other.

The case continues today, with Hands due to be back on the stand.