By Freya Berry
LONDON (Reuters) - Guy Hands renewed his legal pursuit of Citigroup (N:C) over Terra Firma's (TERA.UL) failed takeover of music group EMI on Tuesday, claiming damages of 1.5 billion pounds ($2.18 billion) and alleging in a London court that the U.S. bank misled him.
Citigroup denies the allegations.
Terra Firma bought EMI for 2.4 billion pounds in 2007, when easily available credit fuelled a boom in huge private equity buyouts, but the deal soured when the music group's performance slumped and the financial crisis hit.
At the time of the acquisition, Citigroup advised the then publicly-listed EMI, home of artists including The Beatles, as well as providing financing to Terra Firma.
But when things went wrong at EMI following the Terra Firma takeover, the U.S. lender ended up taking control of it in 2011.
Hands tried unsuccessfully to sue Citigroup in the United States, but the case was terminated in 2014 and it is now being heard in London. A Citigroup spokesman said the Terra Firma case is "entirely without merit".
Terra Firma's lawyers told the High Court that the private equity house lost some 1.5 billion pounds ($2.2 billion), as well as additional lost profits, as a result of the failed deal.
The private equity group alleges that Citigroup misled it into overpaying for EMI. Terra Firma's case is focussed on a series of alleged "oral misrepresentations" by senior Citigroup bankers David Wormsley, Chad Leat and Michael Klein. All three men are being called as witnesses at the trial.
"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 Citigroup spokesman said.
Anthony Grabiner, the lawyer representing the private equity firm, said Citigroup had misled the fund into thinking there was another competitor in the EMI auction process, causing Terra Firma to overpay.
Grabiner also alleged Citigroup did not provide key information to the fund over EMI's creditworthiness.
Terra Firma said in documents presented to the court that a Citigroup employee had in a 2007 email described EMI as a "terminally ill cancer patient on chemotherapy".
Citigroup provided around 2.5 billion pounds of debt to Terra Firma for the 2007 takeover, helping it earn tens of millions of pounds in fees, Grabiner said.