Lawsuit Proceeds Against Firms for Colluding to Depress Prices
Although the judge dismissed two companies, Apollo Global Management and Providence Equity Partners, from the case, eight other private equity firms, some of the largest in the world, must face accusations that they colluded to depress prices on companies they planned to buy. Email evidence shows that the firms had an understanding not to violate “club etiquette” by jumping each other.
Overreaching Conspiracy The judge indicated that the evidence was strong that publicly trade companies purchased by the eight companies between 2003 and 2007 that there was an overreaching conspiracy by the equity firms to work together to keep prices deflated. Although the judge did see reasons why one company would not pursue to buy-out a publicly traded firm, they fact remained that the companies appeared to be working together. The conspiracy involves eight buy-outs, totally $100 billion. The companies in question include buy-outs of AMC cinemas, Aramark, Freescale Semiconductor, Harrah’s, HCA, Kinder Morgan, SunGard and TXU power company. “Stand Down” Agreements At question are whether Blackstone, Carlyle, Goldman and TPG agreed to stand down and allow Bain, KKR and others to purchase HCA in 2006, while Bain, KKR and Silver Lake agreed not disrupt the purchase of Freescale the same year in a reciprocal agreement. In some cases, the agreements deflated prices by as much as ten percent. Emails Damaging Emails between the leaders of the eight companies were particularly damaging. After Blackstone outbid KKR to buy Freescale Semiconductor, Hamilton James, the president of Blackstone emailed colleages informing them that Henry Kravis, the co-founder of KKR, called to let him know they were standing down. Two days later, James emailed the other co-founder of KKR, George Roberts to let him know that Blackstone wanted to work with KKR rather than against them, adding that “together we can be unstoppable but in opposition we can cost each other a lot of money.” These statements indicate that the companies involved had a deal not to bid on each other’s potential acquisitions so that the price for those companies remained low. Stockholders of the companies in question whose prices were deflated due to collusion among the large private equity firms accuse the firms of costing them millions, if not billions. If you were a stockholder for any of these companies between 2003 and 2007, you may be eligible for compensation due to the collusion alleged in the lawsuit. Contact Frenkel & Frenkel, a Dallas law firm, today for a free consultation.