Buyout firm flipped company in one day, Australian court hears

Mon Nov 12, 2012 12:16am EST
 

By Victoria Thieberger

MELBOURNE (Reuters) - A private equity deal involving a Canadian mining services company that was bought and sold on the same day has come under scrutiny in an Australian court.

The case, in which U.S. buyout firm Castle Harlan Inc and Australian engineering firm Bradken Ltd (BKN.AX: Quote) are accused of taking part in "bid rigging," is the first test of an Australian law introduced in 2010 that broadened competition law to include bid rigging.

The case has been brought by the owner of the takeover target, Swiss-based private group Pala Investments, which is controlled by a Russian oligarch, Vladimir Iorich, against Bradken.

Pala sold its Canadian mining services company called Norcast Wear Solutions in July 2011, to New York-based Castle Harlan for $190 million.

Seven hours later, Castle Harlan sold the firm to Bradken, a competitor of Norcast, for $209 million.

In arguments before the Federal Court in Melbourne on Monday, lawyers for Pala alleged that Bradken engaged in "misleading and deceptive conduct" and "bid-rigging" that breached cartel provisions of the law.

Lawyers for Bradken argued there had been no agreement with Castle Harlan to on-sell Norcast.

Pala is seeking at least A$25 million ($25.95 million) in damages, arguing that a trade buyer such as Bradken would usually pay a premium over a private equity buyer. Private equity firms usually hold and manage their investments for a three to five-year period.   Continued...