How Katy Perry lost City’s star deal maker £156m

HE’S renowned as one of the Square Mile’s most astute deal-makers. Guy Hands has carved an estimated £260m fortune out of being able to spot a bargain, and turn struggling firms into corporate successes.

But this week the star financier, who runs private equity firm Terra Firma, has had to lay bare how he lost £156m of his own money in the collapse of record label EMI – with its dazzling list of artists such as The Beatles, Coldplay, Kylie Minogue and Katy Perry (pictured right).

And it wasn’t just cash that Hands claims to have been deprived of, but his reputation in the City and the chance to turn Terra Firma into a mega-firm.

Now Hands, 56, is seeking damages of £1.5bn against bankers at Citigroup, claiming it misled him over the £4.2bn takeover of the music label in 2007. It is a claim the investment giant denies.

The hearing, which began this week, marks the latest twist in a saga that has already been heard in the courtrooms of New York, before crossing the Atlantic, briefly coming to life in a courtroom in Manchester, before heading to London’s High Court.

The US lawsuit was lost, but Hands is trying to prove that he only agreed to spend so much cash on the takeover because Citigroup’s David Wormsley, the head of banking in the UK, lied to him in phone calls about the presence of a second bidder before EMI was auctioned off.

Citigroup advised the record company on the deal, but also provided £2.5bn in finance for Terra Firma, and earned tens of millions of pounds in fees, Hands claims. From the moment Hands bought EMI, the deal started to go wrong. CD sales began to fall around the globe as illegal music downloads started to rocket.

And as the global financial crisis hit it compounded the problems. Citigroup ended up taking control of EMI in 2011. Citi lost £800m and Terra Firma lost £1.5bn in the EMI deal.

This court hearing centres around four sets of alleged conversations between three senior Citi bankers and with Hands in 2007, in which facts were misrepresented. Citi says the alleged misrepresentations did not happen.

Hands (pictured inset) tried unsuccessfully to sue Citigroup in the US, but the case was terminated in 2014 and it is being heard in the High Court in London.

Terra Firma also claims Citigroup did not provide key information to the fund over EMI’s creditworthiness.

Documents shown to the court this week revealed that a Citigroup employee had in a 2007 email described EMI as a ‘terminally ill cancer patient on chemotherapy’.

The downfall of EMI was a blow to Terra Firma, which currently owns the care home group Four Seasons, as well as Odeon & UCI Cinemas Group, which it has put up for sale for a reported £1bn.

It lost a third of its investors’ capital and Hands, who is now said to be worth around £346m, told the court he personally lost £156m.

But more damaging than this, Hands claims, is how his firm and its reputation have suffered.

Hands claims Terra Firma has raised just one £450m fund since the EMI deal.

He told the court that many private equity groups have ‘disasters’ with investments but they all ‘moved on. The problem is the fact that we haven’t moved on. And we haven’t moved on because of good reasons’.

He told the court the main reason was the long-running litigation around EMI.

Hands has lived in a £10m coastal five-bedroom house in Guernsey since 2009, after moving there for tax reasons. His wife, Julia, runs Hand Picked Hotels and still lives in Kent with their four children in their family home which was once owned by Winston Churchill.

Despite getting an A grade, an E grade and a fail at A-level, Hands got into Oxford University to read Philosophy, Politics and Economics and went on to work at Goldman Sachs and Nomura.

Citigroup’s QC, Mark Howard, yesterday accused Hands of changing his story since the first legal case in the US six years ago, and Hands conceded that he had a ‘hazy memory’ of events.

Howard said his account was ‘all over the place’.

A Citigroup spokesman said: ‘Citi did not make any dishonest statements to Guy Hands or Terra Firma throughout the auction process for EMI and is confident the UK trial will confirm this.’

The case continues.