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“I know it may seem strange to advise you how to handle the banks, but I am incapable of not trying to get you the best possible outcome.”
—-David Wormsley to Guy Hands on EMI deal

TERRA FIRMA-CITIGROUP SHOWDOWN PITS TWO OLD PALS

October 18 Trial in New York Finds Guy Hands and David Wormsley at Odds
Never do business with your friends.

The upcoming court case between Terra Firma and Citigroup over the former's ill-fated acquisition of EMI, set to take place in N.Y. starting Oct. 18, pits two old pals of more than 30 years—Guy Hands and his one-time adviser David Wormsley, the bank's London-based Chairman of Investment Banking.

Hands accuses his one-time adviser, regularly ranked as the top mergers and acquisitions banker in the U.K., of misleading him as the EMI sale was about to close, claiming Wormsley “deliberately” failed to tell him a rival bidder, Cerberus, had pulled out of the auction before the deal was done.

Hands insists if he’d known there was no competition, he never would have upped his offer to £4 billion. Citigroup insists Wormsley didn't know Cerberus had dropped out. He also points to the bank’s conflict of interest, considering they would collect a hefty fee for acting as adviser to EMI’s then-owners, while providing debt as a lender to Hands’ group.

At the time, Terra Firma seemed to have no problem with Citigroup's dual role, but now, in the wake of a post-credit crunch, Hands is insisting it’s a conflict of interest. The trial will be held in New York because Hands is a tax exile from the U.K., with official residence in Guernsey.

Terra Firma's lawyers have allegedly discovered hundreds of internal Citigroup e-mails that are damaging to Wormsley and his colleagues.

“I assure you this advice is not motivated by money,” wrote Wormsley in one e-mail to the Terra Firma boss. “I know it may seem strange to advise you how to handle the banks,” he added, “but I am incapable of not trying to get you the best possible outcome.”

At the same time, he assured EMI’s management: “I am absolutely certain that I can deliver very serious added value in any discussion with Guy.”

Both Hands and Wormsley say they will testify at the trial. Insiders claim the legal action is Terra Firma’s way of renegotiating its debt load with Citigroup, but there is no sign yet of any such compromise.

EMI has recently scored chart-topping singles in the U.K. from new British talent such as Tinie Tempah, Roll Deep, Professor Green and Eliza Doolittle, while Katy Perry and Lady Antebellum continue to make inroads internationally, cutting their losses. The company is now under its third chief executive, Roger Faxon, in less than a year, with insiders hoping the N.Y.-based head can provide some stability to the organization.  

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