Goldman Sachs Group Inc. (GS) and Bain Capital Partners LLC agreed to pay a total of $121 million to settle claims they cheated investors by suppressing competition in some of the biggest deals of the leveraged buyout boom before the financial crisis.
Goldman Sachs will pay $67 million under the agreement to settle the antitrust lawsuit while Bain Capital will pay $54 million, according to the preliminary settlement filed yesterday in Boston federal court. The accord must be approved by U.S. District Judge William G. Young, who is set to preside over a trial beginning Nov. 3 against remaining defendants.
Shareholders of companies that were acquired accused Goldman Sachs, Bain and banks and private-equity firms of conspiring to carve up the market for large leveraged buyouts, suppressing prices and depriving investors of billions of dollars.
The case, which covers buyout deals for Clear Channel Communications Inc. and TXU, now known as Energy Future Holdings Corp., remains pending against other defendants including Blackstone Group LP (BX), Carlyle Group LP (CG) and KKR & Co. (KKR)
Individuals and pension funds that held shares in companies including Freescale Semiconductor Ltd. (FSL), Neiman Marcus Group Inc. and HCA Holdings Inc. (HCA) sued Bain Capital, Goldman Sachs and a dozen other investment banks and private-equity firms in 2007 and 2008, claiming the firms teamed up to rig bids, restrict financing and fix transaction prices.
“We went toe-to-toe with the defendants over the past seven years and Bain and Goldman Sachs are the first defendants to agree to settlement terms,” K. Craig Wildfang, an attorney for the plaintiffs, said yesterday in a statement. “We look forward to a trial against the remaining defendants.”
Goldman Sachs said in a statement it was pleased to put the matter behind it. Bain Capital denies any wrongdoing in the settlement of the case, Ernesto Anguilla, a spokesman for the Boston-based firm, said in a statement.
“The court never cited any evidence -– no document, no witness, no meeting -– tying our firm to any of the alleged claims,” Anguilla said in a statement. “We continue to believe the case is meritless and baseless, but ultimately determined that it was best for our investors and our firm to put this matter behind us in light of the costs and distraction of six years of litigation.”
Kirk Dahl, the lead plaintiff in the case, said he and others in the proposed class of investors owned shares in Freescale in 2006 when the chipmaker announced a buyout by firms including Carlyle and Blackstone for $17.6 billion. HCA was bought by companies including KKR and Bain for $32.1 billion.
Goldman Sachs, based in New York, operates private equity funds that invest client money and makes direct investments with its own capital. The firm was often both an investor and lender in leveraged buyouts before the 2008 financial crisis. In 2007, it raised a $20.3 billion private-equity fund, one of the largest ever.
Dallas-based Energy Future Holdings filed for bankruptcy in April, ending the biggest leveraged buyout on record and wiping out most of the $8.3 billion of equity that investors -- led by three of the world’s largest private-equity firms -- sank into the company.
TXU marked the climax of an era when buyouts stretched into the tens of billions on dollars and Carlyle’s David Rubenstein predicted there would be a $100 billion LBO.
After many of those deals faltered in the global financial crisis, private-equity investors mostly shied away from companies valued at $20 billion and up, arguing that such buyouts are often overpriced, overburdened with debt and too big to exit easily.
Since the end of 2008, two private-equity buyouts priced above $20 billion have been announced, both in 2013. That compares with 15 in the five years through 2007, according to data compiled by Bloomberg.
The case is Dahl v. Bain Capital Partners LLC, 07-cv-12388, U.S. District Court, District of Massachusetts (Boston).
To contact the reporters on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at