E-Mails Cited to Back Claim That Equity Firms Colluded on Big Deals

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The New York Times
Thursday, October 11, 2012

E-Mails Cited to Back Claim That Equity Firms Colluded on Big Deals

By PETER LATTMAN and ERIC LICHTBLAU

The private equity giants Blackstone Group and Kohlberg Kravis Roberts are longtime rivals that compete for multibillion-dollar deals. But during last decade's buyout boom, according to newly released e-mails in a civil lawsuit accusing them of collusion, the two firms appeared to be on much cozier terms.

In September 2006, for instance, Blackstone and K.K.R. were both circling the technology giant Freescale Semiconductor. After a Blackstone group outbid a K.K.R. consortium to buy Freescale for nearly $18 billion, Hamilton E. James, the president of Blackstone, e-mailed his colleagues about Henry Kravis, the billionaire co-founder of Blackstone's rival.

"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," Mr. James wrote.

Two days later, Mr. James sent an e-mail to Mr. Kravis's cousin and co-founder, George R. Roberts. "We would much rather work with you guys than against you," Mr. James wrote. "Together we can be unstoppable but in opposition we can cost each other a lot of money."

"Agreed," responded Mr. Roberts. The e-mails are part of a court filing Wednesday in an antitrust civil lawsuit brought against 11 of the world's largest private equity firms that accuses them of colluding to drive down the prices of more than two dozen takeovers of publicly traded companies. Plaintiffs in the case, which was filed in Federal District Court in Boston in 2007, are former shareholders of the acquired businesses.

Much of the 207-page lawsuit had been heavily redacted, but The New York Times brought a motion in August to make the all of the complaint public. A judge ordered the private equity defendants to file an unsealed version of the court papers, leading to the new filing on Wednesday.

"These e-mails are strong signals of anticompetitive behavior," said Darren Bush, an antitrust law professor at the University of Houston. "It is always highly problematic when you have such freewheeling discussions between competitors."

The private equity firms scoff at the idea that their conduct was improper. A Blackstone spokesman, Peter Rose, said that the Freescale deal was competitive and the firm paid a generous price for the company. "Blackstone and K.K.R. have since competed intensely many times and have completed only a single deal together in the past six years," said Mr. Rose.

A spokeswoman for K.K.R., Kristi Huller, said the plaintiffs "make the preposterous claim that the entire private equity industry came together under a master plan to decide which firms would be permitted to acquire any particular public company."

For more, visit www.nytimes.com.