KKR & Goldman Investing In Harman

WASHINGTON (AP) – Audio equipment maker Harman International Industries Inc. on Monday said Kohlberg Kravis Roberts & Co. and GS Capital Partners would invest $400 million in the company, as part of a settlement to end their deal to buy Harman.

KKR and GS Capital, an affiliate of Goldman Sachs, agreed in April to acquire Harman. They subsequently backed out of the deal, however, amid concerns about Harman's business.

In lieu of litigation or a break-up fee, KKR and GS Capital will buy $400 million of 1.25 percent convertible senior notes from Harman, which the company will then use to fund a share buyback.

KKR's Brian Carroll will also join Harman's board of directors.

Harman International Industries, Incorporated (NYSE: HAR) announced today that it has entered into an agreement with affiliates of Kohlberg Kravis Roberts & Co. L.P. (KKR) and GS Capital Partners (GSCP) relating to the parties' previously announced Merger Agreement. Terms of the new agreement include the following:

  • KKR and GSCP will purchase $400 million of 1.25% senior notes convertible under certain circumstances into Harman common stock, convertible at a price of $104 per share. KKR and GSCP have agreed to not sell or hedge their position for at least one year.
  • The parties have agreed to terminate their Merger Agreement dated April 26, 2007 without litigation or payment of a termination fee.

The Company also announced that Brian F. Carroll, Member of KKR, will join Harman's Board of Directors. The Company will use the proceeds from the KKR/GSCP investment to repurchase Harman common stock through an accelerated share repurchase (ASR) program.

Dr. Sidney Harman, Executive Chairman of Harman, said, We are pleased to have reached an understanding with KKR and GSCP. Although we do not agree with the reasons for cancellation of the original merger agreement, we view this $400 million investment as a vote of confidence in our business and its prospects for continued growth. Our company benefits from excellent customer relationships built on world-class products, brands and technology, and we are well positioned to capitalize on market opportunities in the automotive, consumer and professional sectors.

Dinesh Paliwal, Harman Chief Executive Officer, added, The significant stock repurchase we announced today underscores our Board's confidence in Harman's financial outlook. This settlement enables us to move forward in a decisive manner to implement our initiatives to ensure the long-term growth of the Company and avoid the time, cost and distraction of litigation. We welcome Brian Carroll and expect that he will make an active contribution to our business through his service on the Board.

Henry R. Kravis, Co-Founding Member of KKR, said, Harman is a leader in audio and infotainment systems, and enjoys strong leadership in Chairman Sidney Harman and CEO Dinesh Paliwal. The merger unfortunately could not be completed, but we are pleased to make this investment in the Company. We believe this investment and our representation on the Board is an outstanding way to support Harman and its management team in the future.

About Harman International

Harman International (www.harman.com) designs, manufactures and markets a wide range of audio and infotainment products for the automotive, consumer and professional markets. Its brands include Harman Kardon