A winning Hands: Honcho gets new shot to prove Citi lied in EMI deal

Private equity honcho Guy Hands has won an $8 billion do-over.

A Manhattan appeals court yesterday overturned a 3-year-old jury verdict against Hands in his bitter battle with Citigroup over his disastrous buyout of UK record label EMI in 2007.

The 2nd Circuit Court of Appeals awarded Hands’ Terra Firma a new trial after finding that Judge Jed Rakoff misinterpreted the law in his instructions to the jury.

Hands — who claimed Citi banker David Wormsley duped him into overbidding for the ailing music company — was pleased with the outcome of the appeal, according to sources.

“We continue to believe that we have a strong claim, and with the jury instructions now resolved in our favor, we expect to prevail in any subsequent trial,” a spokesman for Hands said.

The ruling is a stunning turn of fortune for Hands as appeals courts are generally reluctant to overturn a case decided by a jury trial.

Both parties agreed that UK law would govern the case, in which Terra Firma sued for $8 billion in damages, even though it was heard in the US courts.

Rakoff erred when he told jurors that Hands had to show he relied on misrepresentations by Wormsley and that they were factors in his decision to bid for EMI.

The appellate court said the bad instructions shifted the burden of proof to Terra Firma from Citi, which is counter to British law.

“Because the district court’s jury instructions were based on an inaccurate understanding of English law, the case must be vacated and remanded for a new trial,” the appellate judges wrote.

Although a date hasn’t been set, sources close to the case said a new trial could happen in 12 months — if both parties are amenable.

However, some speculate that neither side has much appetite for a second trial and may be more inclined to settle the matter out of court this time around.

“We are confident we will again prevail at trial as Citi’s conduct in the EMI transaction was entirely proper,” said a Citi spokeswoman.

The long-running legal dispute, which Rakoff called a “catfight between two rich companies,” centers on Hands’ claims that Wormsley tricked him into making a $6.8 billion bid for EMI.

During the 2010 trial, Hands testified that he made his bid “solely based” on three conversations with Wormsley, who told him that rival bidder Cerberus Capital Partners was readying an offer of its own for EMI at around 2.62 pence per share.

Wormsley has said that he does not recall making such statements.

Terra Firma investors and Hands, who placed a chunk of his own money in the deal, lost roughly $2.5 billion on the buyout.

After Terra Firma-owned EMI was in danger of defaulting on its debt, Citi regained control of the ailing music company in 2011. EMI was eventually broken up and sold off to rivals Universal and Sony.

Given the improved condition of the music business today, sources familiar with Hands’ thinking say he believes his firm could have made a profit of around $400 million if it still owned EMI.