Harman International Industries, known for many MI brands including JBL, AKG, and Lexicon, agreed to be taken private for $8 billion, or $120 a share, by Kohlberg Kravis Roberts & Co. (KKR) and GS Capital Partners (GSCP), Goldman Sachs’ private equity division. Harman’s stock traded much higher than $120 on the day the deal was announced, April 26. That’s because under the agreement, Harman can solicit other bids until today, with some investors expecting another offer to surface. David Leiker, a Robert W. Baird analyst, is on board with that theory as well. “With our $138 target price, high return on invested capital and favorable long-term outlook, we believe another bidder is likely to emerge,” he said in a research note. Despite those comments however, Harman stock dipped below $120 on May 2. If Harman does choose to accept an offer considered superior, it must pay KKR and GSCP $75 million. Harman shareholders must approve any deal.
Shareowners who own Harman stock could either receive cash, or exchange their shares for ones in a new corporation to be formed by KKR and GSCP. That new corporation will not list on a stock exchange, but will register with the U.S. Securities and Exchange Commission. The deal is expected to close in the third quarter of this year. The company will continue to be called Harman International Industries and Dr. Sidney Harman, who owns 5 percent of the company, will remain executive chairman.
“We are pleased to reach an agreement with KKR and GSCP that is in the best interest of our stockholders, presenting them with excellent value for their shares and the opportunity to participate in Harman’s future growth,” Dr. Harman told Business Wire. “KKR and GSCP are two of the world’s leading private equity investors and our board of directors strongly believes this transaction will create attractive long-term opportunities for our employees, customers, and business partners. Together, we will continue to execute our strategic plan, capitalize on new opportunities, and build on our history of product innovation and service excellence.”
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