The private equity giants Blackstone Group and Kohlberg Kravis Roberts are longtime rivals that compete for multibillion-dollar deals. But during last decade’s buyout boom, according to newly released emails in a civil lawsuit accusing them of collusion, the two firms appeared to be on much cozier terms.
In September 2006, for instance, Blackstone and KKR were both circling the technology giant Freescale Semiconductor. After a Blackstone group outbid a Kohlberg Kravis consortium to buy Freescale for nearly $18 billion, Hamilton E. James, the president of Blackstone, emailed his colleagues about Henry Kravis, the billionaire co-founder of Blackstone’s rival.
“Henry Kravis just called to say congratulations and that they were standing down because he had told me before they would not jump a signed deal of ours,” James wrote.
Two days later, James sent an e-mail to Kravis’ cousin and co-founder, George R. Roberts. “We would much rather work with you guys than against you,” James wrote. “Together we can be unstoppable but in opposition we can cost each other a lot of money.”
“Agreed,” responded Roberts.
The emails are part of a court filing Wednesday in an antitrust civil lawsuit brought against 11 of the world’s largest private equity firms that accuses them of colluding to drive down the prices of more than two dozen takeovers of publicly traded companies. Plaintiffs in the case, which was filed in U.S. District Court in Boston in 2007, are former shareholders of the acquired businesses.
“These emails are strong signals of anti-competitive behavior,” said Darren Bush, an antitrust law professor at the University of Houston. “It is always highly problematic when you have such freewheeling discussions between competitors.”
Much of the 207-page lawsuit had been heavily redacted, but The New York Times brought a motion in August to make the all of the complaint public. A judge ordered the private equity defendants to file an unsealed version of the court papers, leading to the new filing on Wednesday.
The private equity firms scoff at the idea that their conduct was improper. A Blackstone spokesman, Peter Rose, said the Freescale deal was competitive and the firm paid a generous price for the company. “Blackstone and KKR have since competed intensely many times and have completed only a single deal together in the past six years,” said Rose.
A spokeswoman for KKR, Kristi Huller, said the plaintiffs “make the preposterous claim that the entire private equity industry came together under a master plan to decide which firms would be permitted to acquire any particular public company.”
The evidence in the case comes as the private equity firms and their business practices remain a focus of the presidential race. The Republican presidential nominee Mitt Romney founded Bain Capital, which is a defendant in the lawsuit.