Article: EMI’s Mess

It’s a shame to see EMI going through so many troubles. I’ve seen some great bands and artist come out of that label. Up here in the Great White North they employ some of the nicest people in the industry. Check the article below from [DMN] on Guy Hand’s mistake and how he is trying to get out of it.

There’s an old saying about money-losing, vanity purchases: If you want to make a small fortune, it’s easiest to start with a large one. That’s certainly the case for Guy Hands, who is now suing – again – over his soiled bet on EMI. Of course, Hands and Terra Firma lost a gargantuan sum on EMI, considered one of the worst private equity deals in history. But he just can’t walk away, he can’t cut his losses.

And this latest episode looks less like a business matter than a personal one. After suing Citigroup and roundly losing, Hands is now filing legal paperwork to recover PriceWaterhouseCoopers documents that apparently informed the Citigroup seizure.

Last time, Citigroup refused to settle, and rubbed a jury-won defeat in Hands’ face. This time around, maybe Hands can make something sting. Citigroup is in the middle of a delicate auction process to finally dump this thing, and shaky credit markets aren’t helping. But now, the Financial Times is reporting that Citigroup is offering to indemnify the winning bidder against the Hands lawsuit.

Otherwise, the price tag would almost certainly drop to accommodate the legal risk. Yet according to sources to Digital Music News, the valuation on EMI is already under serious pressure. Certainly the wretched fate of Hands is fresh in everyone’s memory – or should be – but more uncertainty is coming from ‘termination clauses’ that are lingering over legacy contracts, a monstrous share of EMI Group revenues.

All of which raises the question: why bid big for EMI, anyway? Especially with such a sordid, near-term history, a clear path of financial ruin in its wake? Perhaps a chop-it-up, salvage operation makes sense, but for an expected $4 billion (according to one source)?

Whether the Hands lawsuit complicates the current bidding process is unclear, though Citigroup is rumored to be pushing for a late-September close (on the aggressive side). Incidentally, sources also noted that Warner Music Group buyer Len Blavatnik ‘missed’ the legacy issue on his $3.3 billion WMG purchase, though others may have gotten wind and gotten out. Blavatnik is at the table for EMI as well.