KKR, Blackstone Deal-Rigging Lawsuit Expanded

By Sophia Pearson – Sep 9, 2011 9:23 AM ET

Plaintiffs in a case accusing 11 firms, including KKR & Co. and Blackstone Group LP (BX), of conspiring to rig the market for leveraged buyout deals can expand their investigation, a federal judge ruled.

The plaintiffs, including a Detroit police and fire pension fund, can seek information on 10 additional deals, U.S. District Judge Edward F. Harrington said in a ruling Sept. 7. The transactions are described in a fifth amended complaint, which was filed under seal. Harrington didn’t identify the deals in his ruling. The firms had argued that the addition of the 10 transactions would be “unduly burdensome and prejudicial,” according to court papers.

The lawsuit, initially filed in 2007, claims the firms conspired to drive down prices in the largest leveraged buyout deals in violation of federal antitrust laws. The case previously was limited to 17 transactions. Harrington gave the plaintiffs until April 17 to seek the information.

Among the deals in question is Neiman Marcus Group Inc.’s $5.1 billion buyout by Warburg Pincus LLC and TPG Capital Inc., SunGard Data Systems Inc.’s $11.3 billion takeover by seven private equity firms and Aramark Corp.’s roughly $8.3 billion purchase in January 2007. Three plaintiffs are also shareholders of Freescale Semiconductor Inc., which was taken private by a group including Blackstone and The Carlyle Group. TPG and Carlyle are also defendants in the suit.

The firms allegedly formed “bidding clubs,” referred to in the private-equity industry as “consortia” or “teams” to rig the bidding, according to a redacted fourth amended complaint made public yesterday. Use of the clubs limited the number of bidders, depressing prices at target companies, the plaintiffs said.

“We’re not going to have any comment on that,” said Owen Blicksilver of TPG in a telephone interview today. Kristi Huller, a spokeswoman for KKR, didn’t immediately return a phone message seeking comment on the ruling.

The case is Dahl v. Bain Capital Partners LLC, 07-12388, U.S. District Court, District of Massachusetts (Boston).

To contact the reporter on this story: Sophia Pearson in Wilmington at spearson3@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.