Internal e-mails used in collusion case

Private equity executives’ emails are being used as evidence that some of the world’s most prominent firms allegedly colluded on mega-buyouts between 2003 and 2007, in an effort to drive down prices and limit competition.

Have you ever wanted to read excerpts of internal emails from some of the world’s most renowned private equity executives? Now you can.

Emails from industry luminaries such as The Blackstone Group’s Tony James, Kohlberg Kravis Roberts co-founder George Roberts and TPG’s David Bonderman are being used as evidence in a case that accuses 11 private equity firms and investment banks of conspiring to lower prices on 19 leveraged buyouts and eight related deals between 2003 and 2007. 

Those buyouts include marquee club deals from private equity’s so-called golden age (dubbed the 'Conspiratorial Era' in the filing), including HCA, Freescale, Toys ‘R’ Us, Univision, Harrah’s and Clear Channel. 

The plaintiffs allege that private equity firms coordinated their bids to limit pricing on mega-buyouts, and that firms divided up companies when multiple deals arose at once, in exchange for cooperation. 

“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 said to Roberts in an email. 

“Agreed,” Roberts responded, according to the filing. 

Defendants Apollo Global Management, Thomas H Lee Partners, JP Morgan, Bain Capital, The Carlyle Group, Silver Lake Partners, Goldman Sachs and Providence Equity Partners declined to comment on the case. 

Fellow defendants KKR and Blackstone did not respond to requests for comment at press time. 

“TPG never colluded to suppress deal prices. We competed vigorously for deals that the firm both won and lost. In instances where we considered, but did not move forward with a competing bid, it was a decision based on whether the pursuit and ownership of the asset would be in the best interest of our limited partners,” said a spokesman for TPG. “The plaintiffs have no basis to suggest otherwise and we intend to continue to vigorously defend against their claims.”

The suit, which was originally filed in 2007, argues that the firms' participation in club deals eliminated competition from the market. In the case of public-to-private deals, this ostensibly led to a lower share price for companies' public shareholders. 

“The measure of harm the shareholders suffered is the difference between the price the shareholders received for their shares and the price they would have received 'but for' Defendants' conspiracy,” the filing states. “Recent economic scholarship and analyses confirm that shareholders received far lower prices in LBOs than they would have in a competitive market during the Conspiratorial Era.”

In exchange for neglecting to bid, or offering a 'soft bid' on deals, firms brought in their supposed competitors as partners, the filing says, offering KKR's inclusion of Carlyle and Providence in the PanAmSat deal as an example.

“The club submitted what it described as a 'soft bid' of $20,49 allowing KKR to “win” the auction,” according to the filing. “To complete the scheme, KKR then let Carlyle and Providence into the deal as partners, giving them a total of 56 [percent] of the company.”