Three settle in collusion suit for $325 mln

  • Blackstone, KKR, TPG to apportion cost
  • Carlyle remains a defendant in the case
  • Lawsuit relies heavily on email evidence

The payment by The Blackstone Group LPKohlberg Kravis Roberts & Co and TPG Capital LP will benefit shareholders of some merger targets during a buyout boom that predated the 2008 financial crisis, and was disclosed in a court filing on Aug. 7, sister news service Reuters reported.

Six defendants in the nearly seven-year-old lawsuit have now agreed to pay a combined $475.5 million in various settlements, without admitting wrongdoing. U.S. District Judge William Young in Boston will consider preliminary approval of the accords at a Sept. 4 hearing. The Carlyle Group LP is the only remaining defendant among 11 firms originally sued, and faces a Nov. 3 trial. A spokesman, Christopher Ullman, declined to comment.

In the December 2007 lawsuit, which relies heavily on email evidence, private equity firms were accused of conspiring to drive down takeover prices and reduce competition by following “club rules,” often teaming up on buyouts and providing quid pro quos to influence each other’s behavior. The lawsuit now covers eight buyouts in which the firms allegedly agreed not to “jump,” or outbid, each other after buyouts were announced.

“It’s a pretty good settlement,” said Patrick Coughlin, a lawyer for the plaintiffs. “Antitrust cases like this are tough, and there aren’t many class-action settlements approaching $500 million like this one.”

In one case, soon after a KKR-led group agreed in July 2006 to buy hospital chain HCA Inc, a Blackstone executive allegedly wrote that the $32.1 billion price “represents good value and is a shame we let KKR get away with highway robbery.”

And after a Blackstone-led group in September 2006 beat out KKR to buy Freescale Semiconductor Inc for $17.5 billion, Blackstone President Hamilton “Tony” James emailed KKR co-founder George Roberts that he would “much rather” work together, and that “in opposition we can cost each other a lot of money.”

Twenty-seven buyouts were originally part of the case. A federal judge in March 2013 threw out claims over alleged collusion before buyouts were announced. Other buyouts remaining in the case are movie theater chain AMC Entertainment Inc, food service firm Aramark Corp, casino operator Harrah’s Entertainment Inc, pipeline operator Kinder Morgan Inc, software maker SunGard Data Systems Inc and power company TXU Corp, now called Energy Future Holdings.

Blackstone, KKR and TPG will apportion the $325 million payment among themselves. KKR said it settled to end the distraction and cost of litigating. Blackstone declined to comment. TPG was not immediately available to comment.

Silver Lake Partners LP settled with the plaintiffs in July for $29.5 million. In June, Goldman Sachs Group Inc and Bain Capital Partners LLC settled for a respective $67 million and $54 million.

Carlyle has signaled it plans to fight on. In an Aug. 1 court filing, it said the “plaintiffs’ entire case fails” because they could not show that anyone, but for the alleged collusion, would have jumped others’ buyouts.

Greg Roumeliotis and Jonathan Stempel are correspondents for Reuters in New York.

Photo of a judge’s gavel by Chip East for Thomson Reuters. All rights reserved.