[boead]

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 June 15, with some investors expecting another offer to surface.
 
Shareowners that 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 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.”

[Wayner]

Holding companies that don't have a clue about manufacturing. Good luck HII employees.

[TheChairGuy]

I think Dr. Sidney is in his 80's now...it's a great move for him at this stage of life.

Take the money and run, Sid    His wife, Congresswoman Jane Harman, no longer needs outside political donors for her canpaigns, I guess 

[Wayner]

The new owners of HII will sell off the non-profitable pieces of the company, then implement "lean manufacturing" to reduce labor force (cost centers) then reap profits like a bastard for all of the new owners.

The remaining dismal force will be left to "oar the ship" until it's in total demise. Oh, well.

[macrojack]

Hope you're right about demise, Wayner. I have long felt that Harmon was a blight on the High End landscape.
Consider, however, that this whole thing might just signal Chinese appropriation of many sanctified U.S. brand names.
Have the Chinese bought Stereophile yet? Or Audiogon?

[Audiovista]

This is bad, bad, bad.....Harman had deep bench as far as engineering talent is concerned. Now all these great designers will likely be seen as burden to profitability and be disposed of...... My guess is that we'll have $29.99 HK DVD player in Wal-Mart real soon

Well, my 2 cents.....

[Nels Ferre]

Holding companies that don't have a clue about manufacturing. Good luck HII employees.

Weren't Marantz and Denon purchased by a holding company?   It didn't seem to hurt them any...

[JoshK]

This is a *huge* trend going on in the US and abroad right now.  Tons and tons of small/mid sized companies being bought out by private equity. Too much liquidity sloshed around for too long and this is the enivitable outcome.   If it were for PE though, the stock market wouldn't be trading where it is.  Crap stocks/expensive stocks aren't getting cheap because when they do they get bought. 

[TheChairGuy]

That's probably 1/3 the story, Josh - albeit an important third. 

'Mr. Market' is saying there that several medium and large capitalization stocks are trading rather cheaply these days....far under their enterprise value.  After 5 or so years of underperformance, shareholders are getting antsy and demanding a sale to lock in returns. That's another 1/3.

The final 1/3 is the Sarbanes-Oxley Act of 2002.  In order to demand public companies to be as transparent as possible, it has saddled public companies with reams of nightmarish new regulations that are extremely complicated to comply with and extremely costly, as well.  So, public companies are running to go private so they can release themselves rather then continue to comply to Sarbanes-Oxley.

It is a well-enough meaning Act of Congress in light of implosions at Enron, Tyco and the like, but as in most cases, the punishment seems worse then the crime when Congress steps in (that's not a political statement, just a realistic view)

http://www.gsk.com/about/corp-gov-sarb-oxley.htm

When fair value is not being met by market price, combined with lots of private equity about and Sarbanes-Oxley to contend with, you have takeovers large and small occurring.  Last I heard, the scuttlebutt was that Home Depot, a $70 billion  retailer, was looking into being bought and going private.

This is a *huge* trend going on in the US and abroad right now.  Tons and tons of small/mid sized companies being bought out by private equity. Too much liquidity sloshed around for too long and this is the enivitable outcome.   If it were for PE though, the stock market wouldn't be trading where it is.  Crap stocks/expensive stocks aren't getting cheap because when they do they get bought.

[JoshK]

That's probably 1/3 the story, Josh - albeit an important third. 

'Mr. Market' is saying there that several medium and large capitalization stocks are trading rather cheaply these days....far under their enterprise value.  After 5 or so years of underperformance, shareholders are getting antsy and demanding a sale to lock in returns. That's another 1/3.

The final 1/3 is the Sarbanes-Oxley Act of 2002.  In order to demand public companies to be as transparent as possible, it has saddled public companies with reams of nightmarish new regulations that are extremely complicated to comply with and extremely costly, as well.  So, public companies are running to go private so they can release themselves rather then continue to comply to Sarbanes-Oxley.

Well can't say I agree...S/O is IMHO only around 10% affect (being gratious here) and I don't see many mid cap/ LC stocks trading cheaply that don't deserve to be.

[lazydays]

that's kinda surprising to me (value). Sounds more like somebody had a third party buy it from the market, but wanted to keep their names out of the press.
I really couldn't see it having a net value of $750,000,000. Suspect that Harmon owned something not audio related that was worth some big bucks. Love to see a complete resume of all their holdings as I'm betting that they own a defense contracting company somewhere along the line.
gary

[bpape]

Well, let's see:

Lexicon (IIRC)
Aragon
Harmon Kardon
Klipsch
Revel
A couple of car audio companies I can't think of now
Something else I'm forgetting (sucks getting old...)

Bryan

[TheChairGuy]

http://www.harman.com/what_we_do/default.aspx

[bpape]

Yeah - forgot just a few (Levinson, JBL, DBX, Crown...).  Getting real old.

Bryan

[TheChairGuy]

Well can't say I agree...S/O is IMHO only around 10% affect (being gratious here) and I don't see many mid cap/ LC stocks trading cheaply that don't deserve to be.

I'm not one to quibble over a few percent, but the the effect of Sarbanes-Oxley is not a minor one at all in companies reasons for going private: http://www.networkworld.com/news/2006/061506-sarbanes-oxley.html

As for value in securities today, Large Cap Value and Growth funds have badly trailed small and large cap cousins for half a decade+ now.  Mega and large cap stocks trade at a 15-20% discount to mid and small cap issues...yet have the greatest ability to withstand tightening credit facilities and have the least pricing pressures during economic contraction.  As well, mega cap companies do, on average, considerably more biz outside the US...so an investment in a US mega-cap is an investment in the faster growing economies of the world only with less risk than doing so with companies based outside the G7 (as US companies have the most transparent accounting in the world today).

All at a 15-20% discount to the current market P/E. Large cap companies should command a premium over market averages as there is less risk.  That they can be bought at a significant discount today is a small peek at the next set of highest performing securities in the US.

Large caps, starting fairly soon, will be routinely beating small and mid caps for performance...with many times less risk for investors. This trend will likely continue for 5+ years.  Where there is value, there is opportunity...and large caps are priced quite right now (they've actually run up a bit from their nadir about a year ago)

[boead]

Yeah - forgot just a few (Levinson, JBL, DBX, Crown...).  Getting real old.

Bryan

Mark Levison, Infinity, Revel, Digitech


Big company.

[TheChairGuy]

The deal is dead...either a victim of poor earnings by Harman or reduced leverage opportunities in today's environment by KKR and other debt 'vultures'.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVt8V6_DFzwU&refer=home

Don't cry for Sidney Harman - a $225 million break-up fee is in force 

On these giant deals, the would-be acquirer has to pay these break-up deals.  In a recent deal for half my company, we had to incur a possible breakup fee as the acquiree. Our lawyers said it's standard for small companies to have to pay the fees (if it happens); it's only the really large outfits you hear about in the news that are protected by these break-up fees.

It really does pay to be BIG 

Having now gen thru this, I thought that odd.  Anyhow, it has little to do with the Harman story, but I thought I'd add it to this drizzly Saturday morning in San Fran Bay area