And then there was one.
Three private equity firms – Blackstone, KKR and TPG Capital — have agreed to pay a total of $325 million to settle their part in a bid-rigging lawsuit that originally included 10 defendants. This settlement leaves only The Carlyle Group still facing trial this fall, following earlier judicial rulings and settlements.
According to a court document, the three firms will divvy up the penalty payments among themselves (word is that KKR may pay a bit less than the other two firms). In an SEC disclosure, KKR wrote that the settlement is not expected to have a material effect on the firm’s financial results — perhaps because insurers and PE fund limited partners usually bear the financial brunt of such settlements. Blackstone and TPG both declined comment, and 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 any other firm paid, since the last 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. For starters, the last firm to settle typically pays the most. Particularly if it settles after the plaintiffs are certified as a class. And clearly Blackstone, KKR, etc. felt a class certification was likely coming (thus the settlement). If Carlyle goes to court, it could be risking an extraordinary amount of money. Not only because of a Boston jury’s lack of sympathy for mega-buyout funds – particularly when public pensions are among the plaintiffs – but also because it could be held liable for damages caused by all of the defendants (even those that settled already).
Perhaps Carlyle is betting that the class won’t be certified, or that it can prove in court that the allegations are baseless. Or perhaps it will stipulate that the allegations are accurate, but that they the law does not compel private equity firms to compete with one another for deals. Either way, a very high-risk strategy… even for a high-risk asset class.
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THE BIG DEAL
• Advent International has agreed to acquire approximately 13.85% of clothing retailer Lululemon Athletica Inc. (Nasdaq: LULU) from company founder Chip Wilson (around 50% of his stake) for $845 million. Advent International, a former Lululemon shareholder, also will get two board seats. As part of the agreement, Wilson has promised to delay any proxy fight until 2016, and also will not support any hostile takeover attempts during that period. Read more
VENTURE CAPITAL DEALS
• SmartNews, a Tokyo-based news-discovery app for smartphones, has raised $36 million in Series B funding from Atomico and GREE. www.smartnews.co.jp
• Movile, a Latin American mobile commerce platform, has raised $35 million in Series D funding. Innova Capital led the round, and was joined by return backer Naspers. The company also secured $20 million in long-term debt financing through FINEP. www.movile.com
• Tolero Pharmaceuticals Inc., a Salt Lake City-based developer of treatments for oncology and hematologic diseases, has raised $14.2 million in Series B funding led by Fred Alger Management. www.toleropharma.com
• Adatao, a Sunnyvale, Calif.-based provider of collaboration software for data scientists, has raised $13 million in Series A funding. Andreessen Horowitz led the round, and was joined by Lightspeed Venture Partners and Bloomberg Beta. www.adatao.com
• Social Tables, a Washington, D.C.-based provider of web-based SaaS solutions for hospitality professionals, has raised $8 million in Series A funding. Bessemer Venture Partners led the round, and was joined by Thayer Ventures and return backers Militello Capital, 500 Startups, Middleland Capital and Fortify Ventures. www.socialtables.com
• Izenda, an Atlanta-based provider of self-service custom reporting solutions, has raised $3 million in VC funding from Ethos Capital Partners and Hawthorne Capital. www.izenda.com
• Two Tap, a San Francisco-based automated checkout solution, has raised $2.7 million in seed funding. Backers include Khosla Ventures, Green Visor Capital, Initialized Capital, SV Angel, Digital Garage and Transmedia Capital. www.twotap.com
• Gameface Media, a Boston-based provider of professional photos of amateur athletes, has raised $2.5 million in Series B funding. No investors were identified. www.gamefacemedia.com
PRIVATE EQUITY DEALS
• Blackboard, a provider of software for the education industry, has acquired CardSmith, a Brookline, Mass.–based provider of campus card solutions and card program management services. No financial terms were disclosed. Blackboard is a portfolio company of Providence Equity Partners. www.blackboard.com
• Compass Diversified Holdings has agreed to acquire Clean Earth, a Hatboro, Penn.–based provider of landfill avoidance solutions, from Littlejohn & Co. No financial terms were disclosed. www.cleanearthinc.com
• Evolv Sports & Designs LLC, a Buena Park, Calif.-based rock-climbing shoe brand, has raised an undisclosed amount of private equity funding from Bruckmann, Rosser, Sherrill & Co. www.evolvesports.com
• KKR and CVC Capital Partners are prepping a joint bid for Americana Group, a listed Kuwaiti operator of fast-food and fast-casual restaurants that has a market cap in excess of $4 billion, according to WSJ. Read more.
• Saxco International, a Horsham, Penn.-based distributor of rigid packaging for the alcohol industry, has acquired Square Peg Packaging and Printing LLC, a provider of customized packaging and commercial printing materials. No financial terms were disclosed. Saxco International is a portfolio company of The Sterling Group. www.saxcointl.com
• St. George’s University, a Grenada-based medical school, has raised an undisclosed amount of funding from an investor group co-led by Atlas Partners and Baring Private Equity Asia. The WSJ is reporting that the deal is valued at $750 million. www.sgu.edu
• USJ-IMECO, a portfolio company of J.F. Lehman & Co., has acquired Joiner Systems Inc., a Montreal-based maker of accommodation systems for commercial and government ships. No financial terms were disclosed. www.usjoiner.com
• Green Bancorp, a Houston-based commercial bank with 12 branches in Texas, raised $70 million in its IPO. The company priced 4.7 million shares at $15 per share (low end of $15-$17 range), and will trade on the Nasdaq under ticker symbol GNBC. Shareholders include Friedman Fleischer & Lowe (24.1% pre-IPO stake), Harvest Partners (24.1%), and Pine Brook Road Partners (24.1%). www.greenbank.com
• Ryserson Holding Corp., a Chicago-based metal distributor owned by Platinum Equity, raised $121 million in its IPO. The company priced 11 million shares at $11 per share (low end of $11-$12 range), and will trade on the NYSE under ticker symbol RYI. Merrill Lynch, Deutsche Bank and BMO Capital Markets served as lead underwriters. The company reports $1.4 million of net income on $874 million in revenue for Q1 2014. www.ryerson.com
• Independence Contract Drilling, a Houston, Texas-based provider of land-based contract drilling services for oil and natural gas producers, raised $110 million in its IPO. The company priced 10 million shares at $11 per share (high end of downwardly-revised range), and will trade on the NYSE under ticker symbol ICD. Morgan Stanley, RBC Capital Markets and Tudor, Pickering, Holt & Co. served as lead underwriters. Pre-IPO shareholders include Sprott Resource Corp. (TSX: SCP), 4D Global Energy Advisors, Lime Rock Partners, and the Northwestern Mutual Life Insurance. www.icdrilling.com
• Tobira Therapeutics Inc., Manalapan, N.J.-based developer of antiviral compounds for HIV and liver disease, has postponed its planned IPO. The company had filed to offer around 4.6 million shares at between $12 and $14 per share, with BMO Capital Markets, JMP Securities and Oppenheimer & Co. serving as lead underwriters. Shareholders include Domain Associates (33.4% pre-IPO stake), Frazier Healthcare Ventures (25.3%), Novo AS (17.6%), Montreux Equity Partners (17.5%) and Canaan Partners (2.5%). www.tobiratherapeutics.com
• 3i Group has hired Goldman Sachs to find a buyer for its majority stake in high-end lingerie retailer Agent Provocateur, according to the NY Times. Read more.
• The Carlyle Group is planning to break up PQ Corp., a Malvern, Penn.-based chemical company after failing to find a buyer that would pay $3 billion for the entire company, according to Reuters. Read more.
• Facebook (Nasdaq: FB) has agreed to acquire PrivateCore, a Palo Alto, Calif.-based startup that enables private computing in the cloud. No financial terms were disclosed. PrivateCore had raised just over $2 million in seed funding from Foundation Capital and TEEC Angel Fund. Read more.
• Vector Capital has agreed to sell SafeNet, a Belcamp, Md.-based provider of data protection and software monetization solutions, for $890 million to Gemalto (Amsterdam: GTO). www.safenet-inc.com
• CST Brands Inc. (NYSE: CST) has agreed to acquire the membership interests of Lehigh Gas GP LLC, the general partner of Lehigh Gas Partners LP (NYSE: LGP) from Lehigh Gas Corp. for approximately $85 million in cash and stock (including $17m in cash). www.cstbrands.com
FIRMS & FUNDS
• Mathew Welch, a former managing director with Singapore’s Temasek Holdings, has launched a long-short hedge fund called CA Asia Dorset Fund, which will invest in small and mid-sized firms in developing Asian markets, according to Bloomberg. It is aiming to have $100 million in capital commitments within its first year, with $45 million already subscribed. Read more.
MOVING IN, UP, ON & OUT
• Matt Melymuka has joined Greycroft Partners as a Los Angeles-based senior associate focused on growth equity deals. He previously was with Investor Growth Capital. www.greycroft.com
• Al Villalobos, a former private equity placement agent and CalPERS board member, was indicted yesterday by a federal grand jury for his alleged part in a pension system corruption scheme. Read more.