Carlyle has brought to an end allegations that the world’s largest private equity groups conspired to fix the prices of leveraged buyouts, by agreeing to a settlement ahead of a jury trial.
The Washington-based fund manager was the only private equity group that had refused to settle. It now has agreed to pay $115m to resolve the legal matter, an amount similar to those paid by rivals Blackstone and TPG, a person with knowledge of the accord said. The group denies wrongdoing and does not regard this settlement as an admission of guilt, the person added.
The decision follows similar settlements from rivals Bain Capital, Blackstone, Goldman Sachs, KKR, Silver Lake Partners and TPG, which paid a combined $475m to avoid a trial that would have exposed email exchanges between their dealmakers giving the impression they were colluding to limit competition for assets. Carlyle’s move takes place days before a district court judge was due to issue a preliminary ruling on whether the case merited class-action status – and a ruling that could have determined whether plaintiffs could seek as much as $10bn in damages.
Carlyle declined to comment.
The litigation, which had been making its way through district court in Massachusetts since 2007, was predominantly based on damaging emails, some revolving around the $33bn purchase of US hospital group HCA by Bain Capital, KKR and Merrill Lynch in 2006 – then the largest leveraged buyout in history.
In one email, David Rubenstein, co-founder of Carlyle, rejected competing with KKR, saying: “I don’t want to be in a pissing battle with KKR at the same time we are teaming on other deals.”
After KKR decided to settle last month, Carlyle became the last remaining private equity group still willing to fight in court. It said at the time: “These claims are without merit and we will continue to vigorously contest the allegations.”
But the financial risk “was extraordinarily high” compared with the relatively limited amount needed to settle the case, according to one lawyer who was involved in some of the previous settlements. The prospect of facing a jury in November, with an unpredictable outcome, may have deterred Carlyle for good, lawyers said.
Bain Capital, Goldman and Silver Lake settled by agreeing payments of $54m, $67m, and $29.5m respectively.
The longer the private equity groups waited to negotiate a settlement, the more expensive it became. The $325m settlements that Blackstone, KKR and TPG agreed await court approval this week.