By Grant McCool
NEW YORK, Oct 19 (Reuters) - British financier Guy Hands told a U.S. court on Tuesday that he bid for storied music company EMI in 2007 only because a Citigroup Inc banker he trusted lied to him about a rival offer he had to beat.
Hands, founder of Terra Firma Capital Partners, took the witness stand on the second day of a trial in New York, telling jurors he paid 265 pence per share for EMI in May 2007 acting on 'the false assumption' that rival Cerberus Capital Management was offering 262 pence per share.
There was no other bid and Terra Firma's 4 billion pound ($6.4 billion) deal in May 2007 came to epitomize the perils of loading companies with debt and the associated risks in the leveraged buyout bubble.
Hands testified that on the eve of the bid deadline, onetime Citigroup banker friend David Wormsley 'told me that Cerberus was there at 262 and that it was very important we had to get in. He told me not to play any games with the price.'
Wearing a gray business suit and pale blue shirt, the ginger-haired, bespectacled Hands said during 2 -1/2 hours of testimony: 'His confirmation was incredibly important' in deciding to bid for EMI.
The approach to the deal would have changed completely had he known the Cerberus bid was non-existent, Hands, 51, said.
He is expected to continue his testimony on Wednesday.
Wormsley, 50, one of Citigroup's top European bankers, listened intently in U.S. District Court, his brow furrowed at times. Citigroup denies the allegations of fraud and Wormsley will testify to tell his side of the story later in the trial, which is expected to last about three weeks.
Citigroup Inc provided 2.6 billion pounds ($4 billion) in loans for the EMI acquisition. EMI, which has had music luminaries Nat King Cole, The Beatles, Pink Floyd and scores of others on its label, is struggling under the weight of its debt and trying to keep itself out of the hands of creditor bank Citigroup.
Hands said his decision in 2009 to sue the bank and Wormsley for fraud was 'very, very, last resort.'
'We were relying on Citi to be banker to the company ... it was like putting a stick into a dragon,' said Hands, who continued to attend dinner parties with Wormsley after the buyout of EMI.
'On a personal, personal level there was someone who was a friend and with whom we had worked with successfully over very many years,' Hands said in response to questions from his lawyer, David Boies.
Under cross-examination by Citigroup trial lawyer Ted Wells, the financier acknowledged that the December 2009 lawsuit accused the bank and Wormsley of 'misleading me and lying.' Wells questioned Hands about a meeting he had with then EMI chief executive Eric Nicoli in which they discussed rival interests before any conversations with Wormsley.
The trial centers around three telephone conversations between Hands and Wormsley over the weekend of May 19-20, 2007, as a May 21 deadline to bid for EMI approached.
Terra Firma accuses Citigroup and Wormsley of tricking Hands, who had long coveted EMI, into thinking that Cerberus was also bidding.
In an opening statement on Monday, bank lawyer Wells told the jury that when Hands's realized he had made a bad business deal, he changed his story and sued Citigroup.
$1 = 0.6354 pound
The case is Terra Firma et al v Citigroup et al, U.S. District Court for the Southern District of New York, No. 10-10459.
(Reporting by Grant McCool; Editing by Lisa Von Ahn, Bernard Orr) Keywords: TERRAFIRMA/CITIGROUP (grant.mccool@thomsonreuters.com; +1-212-393-9461; Reuters Messaging: grant.mccool.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Oct 19 (Reuters) - British financier Guy Hands told a U.S. court on Tuesday that he bid for storied music company EMI in 2007 only because a Citigroup Inc banker he trusted lied to him about a rival offer he had to beat.
Hands, founder of Terra Firma Capital Partners, took the witness stand on the second day of a trial in New York, telling jurors he paid 265 pence per share for EMI in May 2007 acting on 'the false assumption' that rival Cerberus Capital Management was offering 262 pence per share.
There was no other bid and Terra Firma's 4 billion pound ($6.4 billion) deal in May 2007 came to epitomize the perils of loading companies with debt and the associated risks in the leveraged buyout bubble.
Hands testified that on the eve of the bid deadline, onetime Citigroup banker friend David Wormsley 'told me that Cerberus was there at 262 and that it was very important we had to get in. He told me not to play any games with the price.'
Wearing a gray business suit and pale blue shirt, the ginger-haired, bespectacled Hands said during 2 -1/2 hours of testimony: 'His confirmation was incredibly important' in deciding to bid for EMI.
The approach to the deal would have changed completely had he known the Cerberus bid was non-existent, Hands, 51, said.
He is expected to continue his testimony on Wednesday.
Wormsley, 50, one of Citigroup's top European bankers, listened intently in U.S. District Court, his brow furrowed at times. Citigroup denies the allegations of fraud and Wormsley will testify to tell his side of the story later in the trial, which is expected to last about three weeks.
Citigroup Inc provided 2.6 billion pounds ($4 billion) in loans for the EMI acquisition. EMI, which has had music luminaries Nat King Cole, The Beatles, Pink Floyd and scores of others on its label, is struggling under the weight of its debt and trying to keep itself out of the hands of creditor bank Citigroup.
Hands said his decision in 2009 to sue the bank and Wormsley for fraud was 'very, very, last resort.'
'We were relying on Citi to be banker to the company ... it was like putting a stick into a dragon,' said Hands, who continued to attend dinner parties with Wormsley after the buyout of EMI.
'On a personal, personal level there was someone who was a friend and with whom we had worked with successfully over very many years,' Hands said in response to questions from his lawyer, David Boies.
Under cross-examination by Citigroup trial lawyer Ted Wells, the financier acknowledged that the December 2009 lawsuit accused the bank and Wormsley of 'misleading me and lying.' Wells questioned Hands about a meeting he had with then EMI chief executive Eric Nicoli in which they discussed rival interests before any conversations with Wormsley.
The trial centers around three telephone conversations between Hands and Wormsley over the weekend of May 19-20, 2007, as a May 21 deadline to bid for EMI approached.
Terra Firma accuses Citigroup and Wormsley of tricking Hands, who had long coveted EMI, into thinking that Cerberus was also bidding.
In an opening statement on Monday, bank lawyer Wells told the jury that when Hands's realized he had made a bad business deal, he changed his story and sued Citigroup.
$1 = 0.6354 pound
The case is Terra Firma et al v Citigroup et al, U.S. District Court for the Southern District of New York, No. 10-10459.
(Reporting by Grant McCool; Editing by Lisa Von Ahn, Bernard Orr) Keywords: TERRAFIRMA/CITIGROUP (grant.mccool@thomsonreuters.com; +1-212-393-9461; Reuters Messaging: grant.mccool.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.