* Court filing with emails among executives unsealed
* James to Roberts: "Together we can be unstoppable"
* TPG says competed vigorously for deals
* Blackstone, KKR decline to comment
By Tom Hals and Michael Erman
Oct 10 Top executives at some of the world's
largest private equity firms, including KKR & Co LP and
Blackstone Group LP, 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.
The emails were revealed in an unredacted version of a
lawsuit filed by shareholders in companies bought by private
equity firms, alleging buyout firms held down the value of
takeover targets by colluding on deals.
"We would much rather work with you guys than against you,"
Blackstone President Tony James wrote in an email to KKR
co-founder George Roberts that is quoted in the lawsuit.
The e-mail was allegedly sent after KKR decided to step down
in the $17.6 billion bidding for semiconductor company Freescale
- a sales process that a consortium led by Blackstone eventually
"Together we can be unstoppable but in opposition we can
cost each other a lot of money," James wrote.
Blackstone and KKR declined to comment on the lawsuit.
Shareholders in more than two dozen companies bought by
private equity firms between 2003 and 2007 claim to have lost
billions of dollars because of the alleged conspiracy around
takeovers, such as the leveraged buyout in 2006 of hospital
company HCA by Bain, KKR and others worth $32.1 billion,
The lawsuit alleges that shareholders lost at least $1
billion because of collusion by private equity firms in the HCA
They have sued more than 10 firms including KKR, Blackstone,
TPG Capital, Carlyle Group, Bain Capital LLC and Goldman
Sachs Group Inc's private equity arm.
The evidence is presented to back up allegations that the
investment firms used a quid pro quo approach to dealmaking. The
plaintiffs allege that various buyout firms underbid or declined
to bid in auctions of companies in return for a role as a
co-investor or to prevent competition for companies they
It is not clear from the documents, however, what the
context of these communications are. The complaint cites parts
of emails to build the case against private equity firms, but
does not disclose the entire messages.
Private equity firms have said that the quotes are taken out
of context and merely reveal communications between companies
that frequently work together on deals, not collusion to bring
TPG said in a statement it never colluded to suppress prices
in buyouts and when it chose not to bid it was acting in the
best interests of its investors.
"We competed vigorously for deals that the firm both won and
lost," the firm said in an email to Reuters.
The private equity firms had argued that unsealing the
complaint would "harm the competitive position of the defendants
and their portfolio companies."
But a federal judge in Boston decided to release a mostly
uncensored version in response to a motion by the New York
The disclosures could embarrass the private equity firms,
which already find themselves in an uncomfortable spotlight
thanks to Mitt Romney's run for president as the Republican
Romney, who cofounded Bain, left the private equity firm in
1999, before the transactions in question.
ALLEGATIONS OF CONSPIRACY
The 221-page complaint cites numerous deals and
communications between senior private equity executives.
One of the deals called into question by the lawsuit is
SunGard Data Systems Inc's 2005 takeover by a group of seven
private equity firms for $11.4 billion.
Silver Lake Partners, Bain Capital, Blackstone, Goldman
Sachs Capital Partners, KKR, Providence Equity Partners and TPG
bought the financial data company.
James Coulter, co-founder of TPG, wrote in an email that
being aggressive in a deal for SunGard would make enemies "while
perhaps benefiting no one but the (company's) shareholders",
according to the lawsuit.
In the buyout of HCA, James Attwood, a managing director at
Carlyle Group, wrote in an email to Alex Navab, co-head of KKR's
North American private equity business: "We will not in any way
interfere with your deal. We would, of course, love to join you
if you need more equity, but rest assured that you will not see
us in any other context on HCA."
Carlyle was not immediately available for comment.
An unnamed Blackstone executive wrote in an internal email:
"[the HCA] deal represents good value and is a shame we let KKR
get away with highway robbery."
However, the lawsuit claims KKR briefly upset the club rules
by bidding on Freescale, a semiconductor company that was in the
sights of Blackstone. KKR's interest forced Blackstone to
increase its bid, according to the lawsuit.
Blackstone retaliated by signing a confidentiality agreement
with HCA. That signal of willingness to compete with KKR for the
hospital company forced both companies to pull back, according
to the lawsuit.
KKR eventually led the deal for HCA, and Blackstone led the
deal for Freescale.
The case is Dahl et al v. Bain Capital Partners LLC et al,
U.S. District Court, District of Massachusetts, No. 07-12388.