Citigroup cleared over EMI bid
US bank Citigroup did not trick Guy Hands's private equity group Terra Firma into paying too much for music group EMI, a US jury has ruled.
Terra Firma had tried to sue Citigroup for up to £7 billion in damages over the £4.2 billion acquisition in 2007, which was mainly financed by Citi.
Terra Firma claimed Citi had effectively tricked it into overpaying for the business - the group behind artists including Lily Allen and Robbie Williams - by pretending another party was also interested in bidding when in fact it was bidding alone.
The New York jury's unanimous decision marked the end of a bitter two-and-a-half week legal battle involving allegations of fraud between two former friends, Mr Hands and Citi's UK investment banking head David Wormsley.
Citigroup claimed Terra Firma's legal action was only brought in an attempt for it reduce the £3 billion debt it owes the bank following the acquisition.
A Citigroup spokesman said: "We are very pleased that the jury reached a unanimous verdict confirming what we have said from the beginning: that Citi and David Wormsley treated Terra Firma with honesty and integrity in the EMI transaction. The jury's verdict makes clear that Terra Firma's irresponsible accusations of fraud were nothing more than a misguided attempt to gain leverage in debt restructuring negotiations."
Terra Firma said it reserved its right to appeal against the decision.
A spokesman said: "We are disappointed that the jury found that we did not prove that we relied on misrepresentations from Citi which caused a loss to our investors. We believe that this was an important action to bring and that we had a responsibility to our investors to bring it. We will continue to focus on achieving the right result for them and for EMI whilst continuing to support the successful development of our other nine businesses."
Terra Firma had reportedly tried to settle out of court by putting forward a settlement proposal for a debt-for-equity swap that would see Citi taking a minority stake in EMI in exchange for wiping out a portion of its £3 billion debt. The bank has already written down the loan in its own books.
Roger Faxon, CEO of EMI Group said his company was unaffected by the ruling: "EMI has had a solid operational performance over the last six months, driven by considerable success in both recorded music and music publishing," he said. "We are wholly focused on further developing our business, and on delivering positive outcomes for the talented artist and songwriter communities we are privileged to represent."