Private Equity Firms, Including Blackstone, Settle ‘Club Deals’ Case with $325M Settlement

Blackstone Group (BX) LP, TPG, and KKR (KKR) will collectively pay $325 million to resolve a securities case accusing several private equity firms of working together to keep the prices they paid to acquire companies down during the takeover frenzy right before the financial crisis. The firms settled without denying or admitting to wrongdoing just three months before the lawsuit was scheduled to go to trial.

Their settlements follow those reached with former case defendants Bain Capital LLC and Goldman Sachs Group Inc. (GC) (collectively, the two paid $121 million) and Silver Lake, which paid $29.5 million. Carlyle Group (CG) LP is the only defendant left. It maintains that the investors’ claims have no merit.

The plaintiffs, who filed their securities case in 2007, sold their shares in numerous companies to private-equity firms during the boom-era buyouts. They contend that firms collude together to acquire companies via club deals and agreed not to compete with each other to lower the shareholders were paid. The investors claim that, as a result, they lost billions of dollars.

In one purported club deal, KKR is accused of backing off from acquiring Freescale Semiconductor because Blackstone was also considering making a deal. In another buy, KKR allegedly asked competitors to stand down in hospital chain HCA’s $32.1 billion buyout.

The case also involves buyout deals for TXU Corp. (now Energy Future Holdings) Clear Channel Communications, AMC Entertainment Inc., Harrah’s Entertainment Inc., Aramark Corp, HCA Inc., Sungard Data Systems Inc., Kinder Morgan Inc., Neiman Marcus Group, Freescale Semiconductor Ltd., and HCA Holdings Inc. Plaintiffs of this lawsuit include pension funds and individuals that were shareholders.

In the previous settlements, Goldman, Silverlake, and Bain, also did not have to admit wrongdoing. If any of these private equity firms had chosen to trial instead of settling, they would have risked paying much more in the event of a loss because of the way antitrust laws work.

Buyout Firms Settle Suit Alleging Collusion Over Deals, The Wall Street Journal, August 7, 2014

Goldman Sachs, Bain Pay $121 Million to End Buyout Suit, Bloomberg, June 11, 2014

Silver Lake to pay $29.5 million in LBO collusion settlement, Reuters, July 11, 2014

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