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Buyout ‘Gluttons’ sued

Shareholders go to court

It’s backlash time for the private equity firms who’ve been gobbling up corporate America — and cutting a particularly wide swath in media.

Their insatiable buying spree is being challenged in court by shareholders of target companies, including Univision, which filed an antitrust suit Wednesday accusing the firms of conspiring to rig prices.

The complaint, filed in U.S. District Court in Manhattan against 13 firms, alleges they formed “clubs” among themselves to bid collectively in buyouts. It claims they exchanged information and submitted bids at agreed-upon prices.

Suit follows news of a probe by the U.S. Dept. of Justice into potential collusion by buyout firms.

A recent cover story in Business Week called “Gluttons at the Gate” explores these firms’ expanding clout through a constant stream of buyouts and their propensity to collect huge dividends and dubious fees from the companies they acquire.

The lawsuit names all the big guns as defendants, including Carlyle Group; Texas Pacific Group; the Blackstone Group; Kohlberg Kravis Roberts; Bain Capital; Merrill Lynch & Co.; Apollo Management; Clayton, Dubilier & Rice; Silver Lake Partners; Thomas H. Lee Partners; Madison Dearborn Partners; Warburg Pincus; and Providence Equity Partners.

Various groupings of the above firms now own Warner Music and MGM and are closing in on buying Clear Channel, and possibly Tribune.

Almost any given auction these days ends up with one or more consortium of financial firms bidding against another. Participants drop in and out of the bidding and shift sides.

Plaintiffs in this case, who are seeking class-action status, include shareholders of Univision, Harrah’s Entertainment and hospital operator HCA.

Their suit claims the plaintiffs “were paid less for their equity shares … than they would have been paid under conditions of free and open competition.”

It also says, “Investors in the target company are deprived of the full economic value of their holdings and ‘squeezed out’ at artificially low valuations.”

Univision agreed in June to a $12.3 billion buyout by Madison Dearborn, Providence, TPG, Thomas H. Lee Partners and investor Haim Saban.

HCA is being acquired by an investor group of Bain Capital, KKR, and Merrill Lynch & Co. for $21 billion.

And Harrah’s is reviewing a $15 billion buyout offer from Apollo and Texas Pacific Group.

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