And then there was one.
Three private equity firms have agreed to pay a total of $325 million to settle their part in a bid-rigging lawsuit that originally included 10 defendants. Today’s agreement leaves only The Carlyle Group (CG) still facing trial this fall, following earlier judicial rulings and settlements.
The trio of settlers included The Blackstone Group (BX), Kohlberg Kravis Roberts & Co. (KKR) and privately-held TPG Capital. According to a court document, they will divvy up the penalty payments among themselves. In an SEC disclosure, KKR wrote that the settlement is not expected to have a material affect on the firm’s financial results — perhaps because insurers and PE fund limited partners usually bear the financial brunt of such settlements.
None of the firms admitted any wrongdoing.
Bain Capital and Goldman Sachs had settled back in June for an aggregate payment of $121 million, while Silver Lake subsequently agreed to pay $29.5 million. That means that the plaintiffs so far have netted nearly half a billion dollars, and any settlement with Carlyle almost certainly would be triple-digit millions (likely more than Blackstone, etc. since the final defendant to settle such suits typically pays the most).
Not included, of course, are the tens of millions of dollars in legal fees paid out by the private equity firms since first being sued nearly seven years ago.
The plaintiffs originally had alleged all sorts of conspiracies related to nearly two dozen “take-private” buyouts that occurred prior to the financial crisis. The court had since narrowed the scope to whether or not the remaining defendants had agreed not to “jump” each other’s bids on eight transactions. Entered into evidence were several emails, including one from Blackstone Group president Tony James to colleagues, after KKR bailed out of an auction for Freescale Semiconductor “Henry Kravis just called to say congratulations and that they were standing down because he had told me before they would not jump a signed deal of ours.” He subsequently emailed KKR co-CEO George Roberts to say: “Together we can be unstoppable but in opposition we can cost each other a lot of money” — to which Roberts responded “Agreed.”
For Carlyle, the road ahead is daunting. If the plaintiffs are certified as a class and are victorious in court, then the firm could be liable for damages created by all of the defendants (including those that have settled). On the other hand, it remains unclear if the plaintiff allegations, even if proven, actually constitute a legal violation.
Below is a copy of today’s court filing, discussing the settlements:
