Terra Firma boss Hands drops $2 billion EMI case against Citi

LONDON (Reuters) - Briton Guy Hands has withdrawn his case against Citigroup C.N over the 2007 buyout of music label EMI, his private equity firm Terra Firma said on Friday, ending almost seven years of on-off litigation over the disastrous deal.

Guy Hands (R) of Terra Firma Capital Partners exits Manhattan Federal Court with his wife Julia in New York October 26, 2010. REUTERS/Brendan McDermid

Hands, the outspoken founder of Terra Firma and a well-known figure in the private equity world, had been seeking damages of 1.5 billion pounds ($2.2 billion), alleging that the U.S. bank misled him over the EMI deal.

“Terra Firma confirms it unreservedly withdraws its allegations of fraud,” a lawyer for the firm told a London court, adding that it would also pay Citi’s legal costs.

At the time of the acquisition, Citigroup advised the then publicly listed EMI as well as providing financing to Terra Firma.

Terra Firma’s case had focused on a series of alleged “oral misrepresentations” by senior Citi bankers David Wormsley, Chad Leat and Michael Klein, which it claimed led to the firm overpaying for EMI. All three men were set to be called as witnesses at the trial.

“These claims were brought in good faith,” Terra Firma said in an emailed statement.

“However, it has become evident that our documentation of the fast-moving and complex events, and memories of these events after nine years, are no longer sufficient to meet the high demands of proof required for a fraud claim in court.”

Citi welcomed the end of the case.

“We are very pleased that Terra Firma has unreservedly withdrawn the allegations, agreed to the dismissal of the proceedings and will pay Citi’s costs in relation to this matter,” Citi said in a statement.

The latest court case over EMI, the home of artists including The Beatles, Pink Floyd and Kylie Minogue, began only on Tuesday.

Terra Firma bought EMI for 2.4 billion pounds in 2007, at the height of the credit bubble. But when EMI’s performance slumped and the financial crisis hit, the buyout house lost its entire investment and had its reputation severely dented.

Hands, the man once known as “the king of British private equity” told the court that the deal personally cost him around 200 million euros ($225 million).

Hands had previously tried unsuccessfully to sue Citi in the United States.

Reporting by Freya Berry; Editing by William Schomberg and Keith Weir