EMI buyer alleges false info inflated label’s price
British equity firm Terra Firma Investments has sued Citigroup Inc., claiming it paid a “fraudulently inflated price” of £4 billion ($6.5 billion) for EMI’s label and music publishing interests in 2007 as a result of misrepresentations made by the lender.
In the action, filed Friday in New York Supreme Court, Terra Firma claims to have lost equity in the billions of dollars as a result of its heavily leveraged purchase of the struggling music company.
The suit adds that Citi has “sought to wrest control of EMI by pushing it into, or to the brink of bankruptcy.” The lender could then sell the insolvent firm to its competitor Warner Music Group, “thus maximizing its recovery on its EMI-related loans, and generating additional investment banking fees from Warner.”
As noted in the action, EMI and WMG have repeatedly and unsuccessfully attempted to merge since the ’90s.
Terra Firma alleges that at the time of an auction of EMI’s assets in spring 2007, all the other private equity companies that had expressed interest in the firm had dropped out of the bidding.
However, Citi executive David Wormsley purportedly told Terra Firma chief exec Guy Hands that another equity firm, Cerberus Capital Management, planned to place a bid on EMI. In response to this false information, Terra Firma placed a binding bid on EMI.
As a broker and lender in the deal, Citi earned some $154.4 million, according to the suit.
Citi has gone on to intentionally interfere with Terra Firma’s economic interests,” the suit claims. It notes that the bank recently refused to restructure Terra Firma’s debt, and has engaged in a “smear campaign” to erode EMI’s position in the marketplace.
Terra Firma seeks actual and punitive or exemplary damages to be determined, plus all monies received by Citigroup in connection with the EMI sale and trading in EMI stock in fall 2007, as well as pre-judgment and post-judgment interest.
Reps of Citigroup could not be reached for comment.