Leading private equity firms -
The Blackstone Group L.P.
Kohlberg Kravis Roberts & Co. L.P.
) and TPG Capital LP - have agreed to settle a lawsuit that accused
them of pulling down the prices of leveraged buyouts (LBOs) through
collusion before the financial crisis. The defendants will be
paying $325 million in aggregate as the settlement amount.
The settlement, reached on Jul 28, was disclosed in the court
filings on Thursday. The lawsuit was filed way back in Dec 2007 by
former shareholders of the acquired companies. It accused more than
10 private-equity firms of rigging the bids to lower competition
for takeovers between 2003 and 2007, thereby depriving investors of
billions of dollars.
Originally 27 buyouts formed part of the litigation. Consequently
in 2013, a federal judge dismissed claims of alleged collusion
prior to the announcement of buyouts. The remaining buyouts
included movie theater chain AMC Entertainment Inc, casino operator
Harrah's Entertainment Inc, software maker SunGard Data Systems Inc
and pipeline operator Kinder Morgan Inc, among others
Apart from Blackstone, KKR and TPG Capital, other defendants
including The Goldman Sachs Group, Inc. (
), Bain Capital Partners and Silver Lake Technology Management
L.L.C. have already settled the case. Notably, only two units of
The Carlyle Group LP (
) presently remain part of the litigation, facing a trial on Nov 3,
Together with recent settlements, this would take the recovered
amount to a total of $475.5 million. However, all the settlements
await approval of the U.S. District Judge William Young, and are
expected to be considered at Sep 4, 2014 hearing. Notably, all the
private equity firms that have resorted to settlements till now,
have not accepted any wrongdoing.
We believe the early settlement of lawsuits prevent increased
litigation overhangs for involved companies, as well as relieve the
aggrieved investors of lengthy trails and raised expenses.
Nevertheless, investors and other financial institutions bearing
the brunt of such faulty practices should be fairly compensated.
Currently, Blackstone carries a Zacks Rank #2 (Buy), while KKR
holds a Zacks Rank #3 (Hold).
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