By Svea Herbst-Bayliss
BOSTON, Dec 18 (Reuters) - The world's biggest private
equity firms, including Blackstone Group and Kohlberg Kravis
Roberts, told a judge on Tuesday they competed fairly and
feverishly for multibillion-dollar takeovers even though some
investors of the acquired businesses argue that they colluded to
drive down prices and split up deals.
In what may become a landmark case for the private equity
industry, the 11 defendants, including other top tier firms
Carlyle Group, Goldman Sachs and TPG Capital, argued in federal
court in Boston that the plaintiffs have shown no evidence that
the firms conspired to fix prices on $250 billion worth of
leveraged buyout deals between 2003 and 2007.
Citing emails that show disappointment at having lost deals
and surprise at how high some deal prices went, Joseph Tringali,
arguing for the private equity firms, said "these are the words
of competitors, not conspirators."
Tringali and other lawyers for the private equity firms
repeated that there was no pattern to who won and lost these
deals. They argued that the firms being acquired often selected
the winning bidders, making it nearly impossible for their
clients to rig the process in advance.
The defense has tried unsuccessfully to get the case, first
filed in 2007, dismissed 10 times before. Now it is going for
number 11 before U.S. District Judge Edward Harrington.
But plaintiffs have argued that the Wall Street firms
cleverly cooperated to drive down prices on some of the biggest
and most lucrative leveraged buyouts (LBOs) in history,
including Freescale Semiconductor, SunGard Data Systems and HCA
Holdings. They are seeking a jury trial and monetary damages.
In six hours of arguments, the judge, who has long
experience with criminal cases, but less expertise in antitrust
cases, frequently interrupted both sides asking questions and
noting problems he has with the case.
The plaintiffs argued there was an overarching conspiracy
between the defendants that touched on all of the 27 LBOs they
referenced. They have said that the prices on the deals were
often some 10 percent below what they should have been, hurting
institutional investors and individual shareholders alike.
For example, after Blackstone put up an $18 billion bid for
Freescale Seminconductor, topping rival KKR, Blackstone
President Hamilton "Tony" James emailed KKR co-founder George
"We would much rather work with you guys than against you.
Together we can be unstoppable, but in opposition we can cost
each other a lot of money," James wrote in the email that was
presented in court.
At one point plaintiff lawyer Christopher Burke put up a
slide that he said mapped out how the 11 firms were related to
the 27 deals. Staring at the jumble of red lines, Judge
Harrington held his head in his hands.
"My problem with this case is that procedurally it is very
difficult," Harrington said, asking Burke how damages would be
allocated amongst the private equity firms.
"They are all on the hook," Burke replied.
Harrington also heard arguments about the HCA Holdings deal
where KKR and Bain paid $32 billion, beating out Blackstone,
TPG, Goldman and Carlyle.
"I came in here thinking this was a slam dunk to go to the
jury," Harrington said adding, "But the defendants have made
Arguments will continue on Wednesday.
Harrington has not given any indication of when he may rule.
The case is Dahl v. Bain Capital et al, U.S. District Court,
District of Massachusetts, No 07-12388.
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