Harman International – the automotive audio equipment manufacturer – looked like the latest victim of buyout burnout last month when KKR and Goldman said they were going to pull the plug on their $8bn takeover.
Both were spooked by “changes in Harman’s business results” – profits cut to 50 cents a share from predictions of $1.02 – and started shouting high and low for a “material adverse change” trigger. It all looked like the stirrings of a very messy divorce.
But according to the WSJ, a deal has now been cut.
Goldman and KKR have agreed to buy $400m of Harman convertible debt securities – paying out 1.25 per cent annually and convertible to shares if Harman stock tops $104 in the next five years. While that may not be ideal, it’s certainly better than forking out a $225m termination fee.
Harman hasn’t exactly come out a winner – whereas KKR and Goldman gave the company a $8bn valuation, the current market capitalisation is around $5.6bn. The $400m loan from the private equiteers is mostly going to be used to buy back stock – a pretty desperate attempt to placate angry shareholders if ever there was one.
A loss of nerve – and money – all round.