You wied to me!
Citigroup sued for lying to investment bankers about other bidders. From reader D.C. comes this tale of perfidy amid the canyons of Wall Street:
Dec. 12 (Bloomberg) – Citigroup Inc. was sued over the 2007 acquisition of EMI Group Ltd. by private-equity firm Terra Firma Capital Partners Ltd., which said the bank misrepresented that another firm was bidding on the record company.
Terra Firma sued to recover “lost equity of billions of dollars” and obtain punitive damages from Citigroup, which stood to garner substantial fees from the deal as investment adviser and lender to EMI and sole financier to the private- equity company, according to a complaint filed yesterday in New York Supreme Court in Manhattan.
When other private-equity firms dropped out of the bidding for EMI in 2007, Citigroup misrepresented that Cerberus Capital Management was actively participating in the auction and that London-based Terra Firma would lose the EMI bid unless it raised its offer, according to the complaint.
Terra Firma said it paid an inflated price for EMI, also based in London, because of Citigroup’s misrepresentation. The bank also interfered with Terra Firma’s investment by rejecting efforts to restructure EMI and attempting “to soften the markets” for EMI in a bid to take control of the record company by pushing it into insolvency, according to the complaint.
“We believe this suit is without merit and we will defend ourselves vigorously,”Danielle Romero-Apsilos, a Citigroup spokeswoman, said in an e-mail.
Guy Hand, Terra Firma’s founder, stepped down as chief executive officer this year after the firm wrote off about half its EMI investment. The label posted a 1.39 billion-euro loss in 2008 amid a continued drop in album sales.
The case is Terra Firma v. Citigroup, 09603737, New York State Supreme Court (Manhattan).
This is about on a par with Kimberly Piccioli’s suit against Whole Foods for letting her buy raw milk. Big, tough buyout vultures were told an untruth by the seller’s representative and they believed it? Why, that’s never happened on Wall Street before, ever! Who’d have guessed? This happens in Greenwich real estate all the time, by the way, but I think it’s a dumb move. Two different agents for different sellers told me that this past fall and, when my buyers didn’t go forward, neither property sold to someone else. The community of agents is pretty small here, and there are even fewer whom I trust. So when someone bluffs like this and that bluff is exposed, I don’t take offense, but the agent definitely moves to the “Bullshit” pile, and all future transactions are handled accordingly.
Seems to me if you are the bidder you should know the value of what you are buying. What someone else (true or not) might be willing to pay should be irrelevant.
Agreed.
Story is good mockery material, esp when one realizes the hierarchy of IQ and wealth in modern finance: HF>>PE>IB
A bunch of teary-eyed PE girlie guys claiming they were duped by idiot, impoverished IBers who answer to community organizers these days…
Am I missing something here?
“… Terra Firma sued to recover “lost equity of billions of dollars” and obtain punitive damages from Citigroup, which stood to garner substantial fees from the deal as investment adviser and lender to EMI AND sole financier to the private- equity company … ”
So it seems Citigroup was playing both sides of the deal, rather than just being the EMI rep. If they somehow concealed this fact from Terra Firma, it seems to me Terra Firma has a pretty valid complaint. On the other hand, this does seem like something that, um, 2 minutes of due diligence on Terra Firma’s part would uncover. So, what’s the real story?
Aha – I missed the reference to double-dealing and thought Citigroup was just representing the seller. If they were representing the buyer then they did have an obligation to deal with them in good faith – question: how on earth could it possibly be ethical to be advising both sides to a deal, and how could Terra be dumb enough to agree to that?