Investment firm Terra Firma loses lawsuit over EMI

Lily Allen on EMI

Musician Lily Allen is just one of the many big-name artists on the embattled EMI label. Image: Wikimedia Commons

In 2007, investment firm Terra Firma purchased control of music giant Electric and Musical Industries Ltd. After losing more than $2.5 billion on the investment, Guy Hands of Terra Firma’s decided to sue Citibank. A jury has found, however, that Citibank did not defraud Terra Firma in the purchase of EMI, as was accused.

Terra Firma purchase of EMI

In August 2007, investment company Terra Firma made a $6.8 billion purchase of British company EMI. Citigroup funded the purchase, just before credit markets seized in October of 2007. Since that purchase, Guy Hands, who controls the Terra Firma fund, has lost billions in the company. He has also been the target of frustrated investors who are not happy with the fact two-thirds of the fund is tied up in the quickly shrinking EMI.

Terra Firma takes Citigroup to court

Citigroup, which funded the Terra Firma purchase of EMI, has been on the defensive. Terra Firma sued Citigroup, claiming, among other things, that the company defrauded Terra Firma in the EMI purchase. Terra Firma apparently believed that it was in a “bidding war” for EMI, when it was not. A jury unanimously found that Citigroup did not defraud Terra Firma in the purchase.

What is next for EMI?

EMI is one of Britian’s largest music labels. Musicians as diverse as Lilly Allen and the Rolling Stones have been or are on the EMI label. When Terra Firma and Guy Hands took over the label in 2007, spending was slashed at every corner almost immediately. Many large acts, including as the Rolling Stones, decided to leave the label. Despite the cost-cutting, however, Hands is claiming that EMI has cost him more than $8 billion. Hands may very well be removed as the head of Terra Firma, as well as EMI. Citigroup has said that, because of the lawsuit, the company is “much less likely” to be willing to discuss refinancing for EMI. This could leave the musical industry giant ripe for takeover or purchase by yet another company.

Source

Business Week

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