Guy Hands reopens action against Citigroup over EMI buyout

Guy Hands is to resume his long-running legal battle against US bank Citigroup this week over his buyout of EMI.

The private equity tycoon, along with lawyers for his buyout business Terra Firma and Citigroup, will give evidence regarding the bank’s role in his infamously ruinous buyout of EMI almost a decade ago in 2007.

Whilst the case was shut down in the US, opening statements will be made today in the second trial in the London High Court. Hands and Terra Firma are expected to delve into claims they were tricked into acquiring EMI for £1.75 billion in 2007 afterbeing told a bidding war for the then major label was underway. Hands asserts Citigroup falsely claimed New York investment firm Cerberus was among the bidders and advised Terra Firma to increase the level of its equity investment by £205 million.

Hands actually sued Citigroup over such claims in 2010, but a jury in New York rejected the case. In 2013 the case was overturned on appeal over a misinterpretation of English law.

Hands and Citigroup’s hostile relationship famously came to an end in 2011 after Hands’ Terra Firma failed to support its £2.5 billion of debt from Citibank, thus failing an insolvency test. Citigroup placed EMI into administration and the label’s board of directors appointed PricewaterhouseCoopers (PwC) as administrators. Of course, in November 2011 EMI was sold off to Sony and Universal and lives on among the globe’s biggest music executives.

Today in front of a single judge in London’s High Court Hands will restate claims he was ‘duped’ into purchasing EMI and sue for damages estimated to be between €650 and €800 million. Hands is targeting Citibank’s former head of global banking and markets Michael Klein, its former European head of investment banking David Wormsley and former head of global credits market, Chad Leat.

According to Billboard, Hands is also claiming the aforementioned former Citi executives made false claims about EMI’s financial health.

Billboard has published an excerpt from Terra Firma’s pre-trial submissions. In an email conversation in May 2007 between bankers Jan Skarbek and Matthew Smith, Skarbek said of the EMI sale: “Well done! I am amazed you got them to pay up for that old pup.”

Smith responded by saying: “Thanks. Can’t imagine why Guy bought it — he must have a Machiavellian plan.”

A spokesperson for Terra Firma said in a statement to media: “This is a new trial, with new evidence and new allegations of fraud against Citi regarding the sale of EMI. We look forward to an English court considering these serious claims under English law. We will not comment further at this time.”