A Massachusetts federal judge has granted preliminary approval to $590 million in settlements involving a class of shareholders who had sued Goldman Sachs Group Inc., Carlyle Group LP and several other private equity firms. It was alleged by the shareholders that the companies had teamed up to keep leveraged buyout prices low. U.S. District Judge William G. Young gave preliminary approval on a series of settlements the firms have reached with the Plaintiffs in the antitrust class action. A February 2015 date was set for the hearing to determine if the settlements should receive final approval.
The decision comes just a month after Carlyle became the last defendant to resolve the suit with a $115 million settlement to avoid a November trial in the case. The suit was brought by shareholders of companies the firms underpaid for by agreeing not to compete with one another for several major leveraged buyouts. The case had been pending in federal court in Boston for more than five years. In the complaint 19 separate deals between 2003 and 2009 are alleged in which the firms allegedly followed an elaborate set of bidding rules to artificially deflate prices, shortchanging shareholders in the target companies. Among the buyouts highlighted in the suit are a $21-billion deal for hospital chain HCA Holdings Inc. and a $5.1 billion purchase of high-end retailer Neiman Marcus Group Ltd., and another six related transactions.
Plaintiffs claim damages from the collusion will be in the billions. This was the factor that was said to have led to the recent settlements. The standard method for calculating treble damages calls for the deduction of partial settlement amounts only after tabulating the enhanced damages, rather than before – resulting in a higher total divided among fewer players. Goldman and Bain Capital Partners LLC were the first to reach a settlement with the Plaintiffs in June, agreeing to pay $67 million and $54 million, respectively, to exit the case. Silver Lake Partners LP followed suit in July with a $29.5 million settlement. In early August, KKR & Co. Inc., Blackstone Group LP and TPG Capital LP then agreed to pay a total of $325 million, leaving Carlyle as the sole remaining defendant with a looming trial.
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