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Terra Firma, the troubled private equity group who own EMI, have won round one of their legal squabble with Citigroup regards the equity firm's purchase of the music major back in 2007. Terra Firma are suing their bankers over allegations Citigroup execs gave bad advice, and withheld crucial information, in the days before the equity group made its bid for the music company, in particular failing to inform Terra Firma boss Guy Hands that it looked likely that rival bidders were going to step away from the negotiating table. Had Hands and his team had this information, they argue, they would not have bid so quickly, or certainly not at the higher price they offered. And had Terra Firma not rushed to take control of EMI, the credit crunch would have probably occurred before the deal was done. The crunch radically changing the context of the takeover, and had the EMI deal still to be done after the economic downturn had begun, it's possible Hands et al would have walked away form the deal. Once it became clear late last year that Citigroup would not write off a cool billion of EMI's debt like Terra Firma wanted, Hands and his team decided to go the litigation route, claiming that the bank gave bad advice back in 2007 because of a conflict of interest, another branch of the same bank were advising EMI's then management.
Bank fail to being case to London
Terra Firma are suing through the US courts, but the bank tried to have the case moved to the UK on the basis the EMI deal was really a London-based transaction. Conspiracy theorists suggested Citigroup wanted the court case moved to London just to annoy Hands, who last year moved to the Channel Islands over government's increase in tax levels for the super rich, and as a result he can only spend a handful of days in the UK capital without breaching tax rules. That would make it difficult for Hands to be personally involved in the court battle. But a New York judge has dismissed Citigroup's attempts to get the case moved, saying, simply: "For reasons that will be elaborated in a forthcoming written opinion, Citi's motion is denied in its entirety". Citigroup said they were disappointed with the ruling, but that they looked "forward to defending ourselves in this case, which we believe is entirely without merit". According to the FT, the first proper court hearing is now due to take place in New York on 18 Oct, with a pre-trial conference on 10 Sep. Additional reporting by CMU Network
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