False assumption led to EMI bid, Hands testifies

* Trial in New York centers on May 2007 conversations

* EMI deal epitomizes dangers stemming from buyout bubble

* Hands takes stand; Citigroup banker to testify later

By Grant McCool

NEW YORK, Oct 19 (BestGrowthStock) – Guy Hands bid for storied
music company EMI in 2007 based on false statements from a
Citigroup banker that there was a rival offer he had to beat,
the British financier told a jury on Tuesday.

Hands, who founded Terra Firma Capital Partners, took the
witness stand on the second day of a trial in U.S. District
Court in Manhattan to decide his private equity group’s fraud
claim against Citigroup Inc (C.N: ), which provided 2.6 billion
pounds in loans for the EMI acquisition.

In the ensuing credit crisis, the 4 billion pound ($6.4
billion) soured deal came to epitomize the perils of loading
companies with debt and the associated risks in the leveraged
buyout bubble.

The trial centers around three telephone conversations
between Hands and David Wormsley, his onetime Citigroup banker
friend, over the weekend of May 19-20, 2007, as a May 21
deadline to bid for EMI approached.

Terra Firma [TERA.UL] accuses Citigroup and Wormsley of
tricking Hands, who had long coveted EMI, into thinking that
rival private equity firm Cerberus Capital Management [CBS.UL]
was also bidding for the company.

Terra Firma paid 265 pence per share for EMI in the belief
Cerberus would offer 262 pence per share, but the rival bid did
not exist, the nine-member jury heard.

“He told me that Cerberus was there at 262 and that it was
very important we had to get in,” Hands, 51, wearing a gray
business suit and pale blue shirt, said of one of the
conversations. “He told me not to play any games with the

In response to questioning by his lawyer, David Boies, the
Terra Firma head told the court that “his (Wormsley’s)
confirmation was incredibly important” in deciding to bid for

Citigroup denies Terra Firma’s allegations that Wormsley or
the bank lied to Hands or tricked him. The bank argues that
Terra Firma sued after realizing the deal had gone badly.

Hands’ testimony was continuing on Tuesday, and Wormsley,
one of Citigroup’s top European bankers, was expected to tell
his side of the story later in the trial.

The trial is expected to last up to three weeks.

The case is Terra Firma et al v Citigroup et al, U.S.
District Court for the Southern District of New York, No.
(Reporting by Grant McCool; Editing by Lisa Von Ahn)

False assumption led to EMI bid, Hands testifies