A federal judge narrowed a lawsuit accusing some of the world's largest private equity firms of colluding to drive down prices on companies they sought to buy, harming shareholders of the acquired businesses.
U.S. District Judge Edward Harrington in Boston said investors may pursue their claim of an "overarching agreement" among the firms not to outbid each other after the transaction were announced, a practice known as "jumping."
But the judge said the plaintiffs fell short of demonstrating a wider conspiracy to drive down the takeover price.
"While some groups of transactions and defendants can be connected by 'quid pro quo' arrangements, correspondence, or prior working relationships, there is little evidence in the record suggesting that any single interaction was the result of a larger scheme," Harrington wrote.
The civil antitrust lawsuit was brought in 2007 against private equity firms including Bain Capital Partners LLC, Blackstone Group LP , Carlyle Group LP , Goldman Sachs Group Inc's private equity arm, KKR & Co and TPG Capital Management LP.
Plaintiffs in the case include shareholders in more than two dozen formerly publicly-traded companies that were bought by the firms between 2003 and 2007. These shareholders claimed to have lost billions of dollars because of the firms' conspiracy to artificially deflate takeover prices.
Twenty-seven transactions were challenged, including 19 leveraged buyouts, six non-leveraged buyouts, and two that were never conducted.
Among the companies involved were casino operator Caesars Entertainment, lodging company Hilton Hotels and hospital chain HCA, the subject of a $32.1 billion leveraged buyout in 2006 by Bain, KKR and others.
The case is Dahl et al v. Bain Capital Partners LLC et al, U.S. District Court, District of Massachusetts, No. 07-12388.
(Reporting by Jonathan Stempel in New York; Editing by Grant McCool and Andrew Hay)