Factbox: Lawsuit accuses buyout firms of collusion

Wed Oct 10, 2012 10:25pm EDT

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(Reuters) - Top executives at some of the world's largest private equity firms, including KKR & Co LP (KKR.N) and Blackstone Group LP (BX.N), sent emails that allegedly show them plotting to scoop up companies on the cheap during last decade's buyout boom, according to court documents unsealed on Wednesday.

Here are some unedited excerpts from the complaint:

* "On May 31, 2006, Carlyle co-founder David Rubenstein wrote in an email to the founder of Carlyle's European arm that they were able to join the Kinder Morgan deal 'because we had complained about Goldman competing with us and never having brought us a deal. So (former Goldman Sachs Chairman Henry] Paulson told his partners to bring us into the deal.'"

(Kinder Morgan Inc (KMI.N), an energy company, was taken private in 2006 for $26.5 billion by a group of firms including Goldman Sachs Group Inc's (GS.N) private equity arm and Carlyle Group (CG.O).)

* "On July 27, James Attwood, managing director of The Carlyle Group, wrote to Alex Navab of rival KKR: 'I left you a voice mail. We are NOT forming a competing group (although we have received many calls), we are not signing an NDA, we are not taking any info and we will not in any way interfere with your deal.'"

(HCA Holdings Inc (HCA.N), the largest for-profit hospital operator in the United States, was taken private in 2006 by a consortium that included Bain Capital, KKR & Co as well as Bank of America Corp (BAC.N), Citigroup Inc (C.N) and HCA's founder for $32.1 billion including debt.)

* "After winning the deal, Bain and Blackstone offered a financing role to the supposed 'losers' in the deal, KKR and Apollo, as well as J.P. Morgan who served as financial advisor to Michaels Stores throughout the bidding process. Blackstone justified its decision to bring these firms into the deal by saying, 'youscratch our back, we scratchyours.'"

(Michaels Stores, a retailer of arts and crafts supplies, was taken over by Bain and Blackstone in 2006 for $6 billion.)

* "Blackstone, KKR, and TPG had partnered together to purchase Texas Genco - even though each was fully capable of purchasing the company alone.

"Blackstone's David Foley concluded that Blackstone should join the TPG/KKR consortium to avoid competition: '... better for everyone to join forces and have a much higher chance of winning the deal and not drive the price up.'"

(A consortium made up of Blackstone, KKR, TPG and Hellman & Friedman bought U.S. power generation company Texas Genco for $3.65 billion in 2004.)

* "Ignoring Suez's auction rules, Stephen Schwarzman, Chairman and CEO of Blackstone, and Leon Black, Chairman CEO of Apollo, entered into a secret bid-rigging agreement whereby the Apollo/Goldman Sachs consortium would permit Blackstone to submit a 'winning' bid for Nalco in exchange for an award of a piece of Blackstone's deal after the auction was closed.

"This agreement was memorialized in multiple internal emails to and from senior executives for the Defendants. As early as August 29, 2003, Rich Friedman, the head of Goldman Sachs' Merchant Banking Division, observed in an internal email 'On Nalco, it appears the other side is favoring blackstone ... If B wins, we will likely get an opportunity to join. We don't want to be played off against them.'"

(An investment group composed of Blackstone, Apollo Management (APO.N) and Goldman Sachs Capital Partners bought water-treatment company Ondeo Nalco in 2003 for $4.3 billion from French utility Suez.)

* "SunGard shareholders did not in fact benefit because 'the large P E (private equity) universe was all working together,' as the firms had agreed not to compete for SunGard. Indeed, Silver Lake reached out to Blackstone via J.P. Morgan chiefbanker Jimmy Lee 'to soothe them Blackstone for not getting invited but to not bid against <Silver Lake> as <Silver Lake> will let them in.'"

(SunGard Data Systems Inc was bought in 2005 by a group of seven private equity firms for $11.4 billion.)

(Compiled by Phil Wahba; Editing by Richard Pullin)

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