Just as the U.S. Justice Department’s antitrust inquiry fades in the rearview mirror, along comes a plaintiff’s law firm looking to dig up the same dirt.
Last month, Robins, Kaplan, Miller & Ceresi, a respected Minneapolis trial firm, filed suit in federal court in Boston. The firm accuses some of the biggest names in the buyout business of colluding in clubs to lower prices for big take-private transactions between 2003 and 2006. The suit points, for instance, to the various bidding clubs that made plays for luxury retailer Nieman Marcus; the successful joint bid was less than a $5 billion offer reportedly made by another party, according to the suit. The suit contends that shareholders in the delisted company were shortchanged by these allegedly collusive arrangements.
The suit comes several months after the Justice Department launched its investigation into club deals by sending requests for information to several top buyout groups. A group of shareholders filed a similar suit last year, although it was later withdrawn pending the outcome of the Justice Department investigation. Since then, the federal agency hasn’t issued any reports, and the hubbub that coursed through the industry has all but disappeared.
One reason may be that the club deal has grown a lot less common. A recent study of buyout-sponsored U.S. take-privates by Weil, Gotshal & Manges found that the percentage involving two or more sponsors fell from 59 percent in 2006 to just 37 percent in 2007. Antitrust attorneys told Buyouts last year that the Justice Department investigation was giving firms pause before forming clubs with other sponsors, while sell-side advisers soliciting bids on behalf of corporate clients were becoming more aggressive at preventing clubs that might dampen competition. Instead of other sponsors, LBO shops have been turning to deep-pocketed limited partners to serve as co-investors. The virtual disappearance of mega-deals requiring mammoth equity checks has also eased pressure on buyout firms to form clubs.
Robins, Kaplan, Miller & Ceresi has a solid track record: It’s a highly ranked litigation shop that won a $6 billion settlement in 1998 from tobacco companies on behalf of the state of Minnesota. But there is a sense that the firm is fighting last year’s war. And lawyers have agreed that any private suit will have to await the outcome of the Justice Department’s inquiry. And there’s no telling when that will arrive.