KKR Reaches Settlement Over Private Equity Collusion

KKR Reaches Settlement Over Private Equity Collusion

KKR & Co. L.P. (NYSE:KKR) has agreed to settle accusations that it violated antitrust laws by allegedly conspiring to rig bids, fix prices for target companies at artificially low levels, and divide up the market for private equity services for leveraged buyouts.

In its regulatory filing Thursday, KKR & Co. L.P. (NYSE:KKR) said the amount to be paid pursuant to the settlement is not expected to have material impact on its financial results.

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Alleged collusion among PE funds

As reported earlier, there have been various allegations of impropriety and collusion among private equity funds. A shareholder lawsuit claiming some firms colluded to depress the prices of acquired firms has been cleared to go to trial.

As reported by us, in 2012, leading private equity firms were accused of a bid-rigging conspiracy in a class lawsuit filed in 2007 by shareholders of the companies they acquired. The shareholders alleged that the private equity firms agreed not to bid against each other, in order to reduce the acquisition price of the more than two dozen companies.

According to investors, they lost billions of dollars because of the private equity firms’ bid-rigging practices. Court document revealed that Bain Capital’s competitors did “stand down” in bidding against the firm to acquire Hospital Corporation of America (HCA), due to the understanding that they will not compete against each other on future transaction targeted leveraged buyouts. Bain Capital, together with KKR & Co. L.P. (NYSE:KKR) and Merrill Lynch, bought HCA for $32.1 billion in 2006.

In its regulatory filing Thursday, KKR & Co. L.P. (NYSE:KKR) disclosed a suit filed in December 2007 alleged that from mid-2003, defendants, including KKR along with 15 other private equity firms and investment banks, have violated antitrust laws by allegedly restricting the supply of private equity financing and conspiring to rig bids.

KKR’s settlement in investors’ interest

If the settlement is approved by the Federal District Court in Massachusetts, it would resolve KKR & Co. L.P. (NYSE:KKR)’s role in a years-long lawsuit filed by former shareholders of the companies that the private equity firms acquired. Three defendants, viz.: Bain Capital, Silver Lake and Goldman Sachs have already agreed to settle the claims against them.

According to a spokeswoman for KKR & Co. L.P. (NYSE:KKR), settling acquisition-related litigation is frequently in the best interest of investors, on whose behalf the private equity giant pursues those acquisitions. She further added while KKR continues to believe that the plaintiff’s allegations are spurious, the private equity giant determined that after seven years it was best for KKR and its limited partners to put an end to the distraction and expense of the litigation.

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