January 10, 2012 10:36 pm

Hands’ plea for EMI data rejected by court

Guy Hands has been dealt a blow in his legal dispute with Citigroup over the US bank’s seizure of EMI. A UK court has thrown out his application demanding that PwC, the music group’s administrators, and other advisers disclose valuation documents.

Mr Hands lodged an application with the High Court in September asking that PwC, Hawkpoint Partners and American Appraisal hand over valuation reports and written communication relating to valuations when Citigroup took control of EMI from Terra Firma, his private equity vehicle, in February.

In his arguments Mr Hands’ barrister claims that the joint administrators were not validly appointed and that the sale of EMI was undervalued or should not have taken place at all.

Citigroup wrote off £2.2bn of its £3.4bn loans to Mr Hands’ 2007 ill-fated buy-out when it seized control of the music company last year, leaving EMI with more than £300m in cash and £1.2bn of debt.

The administrators sold EMI to Citigroup for an undisclosed amount through a pre-packaged administration, the largest on record.

Mr Hands’ submission stated that the sale of EMI’s assets to Citi was “to crystallise a loss by Terra Firma of the entirety of its investment of about £1.85bn” and added that there were “serious concerns about the circumstances surrounding the sale by the joint administrators”.

PwC, Mr Hands and Citi all declined to comment.

“There is enormous hostility between Terra Firma and Citi with two battle-zones in place,” Mr Justice Warren said in his ruling.

“First the New York courts where TF seeks to recover their investment and, potentially at least, in London where they may seek to say that the joint administrators were not validly appointed and that there has been a sale at undervalue.”

But the judge said there was not “the slightest suggestion” that Citi had “effected sales at undervalue” which would be “entirely contrary to its commercial interests”.

He also found that it did not appear TF needed “any of the valuations” to formulate their claims in so far as they centre on the value of EMI Group.

“I do not consider that the disclosure of the valuations before proceedings have started will assist in achieving a fair disposal of the anticipated proceedings,” the judge also found.

The judgment is another setback for Mr Hands after a US court ruling in 2010 that cleared Citigroup of all allegations over Terra Firma’s takeover of EMI.

Mr Hands claimed that Terra Firma had been misled into overpaying when it bought the music company for £4.2bn in 2007. Mr Hands is expected to have his appeal heard in the US this month. Accounts from Companies House show that Terra Firma paid a £3.5m ordinary dividend to Mr Hands in April.

The UK music group behind Robbie Williams and the Beatles was last year broken up and sold in two parts to Vivendi’s Universal Music and Sony in a deal representing one of the largest shake-ups of the recorded music and music publishing industry. But regulatory hurdles still have be cleared.

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