KKR, GS Capital to invest in Harman International

By Lisa Kerner

Charlotte, N.C., Oct. 22 - Harman International Industries, Inc. entered into an investment agreement with affiliates of Kohlberg Kravis Roberts & Co. LP and GS Capital Partners.

On Sept. 21, it was reported that KKR and GS Capital believed a material adverse change in Harman's business occurred, that Harman breached its merger agreement and that they were not obligated to complete that merger. Originally, Harman was to be acquired by KKR and GS Capital for $120 in cash per share in a transaction valued at about $8 billion.

Under the terms of the new agreement, KKR and GS Capital will purchase $400 million of 1.25% senior notes convertible under certain circumstances into Harman common stock with a conversion price of $104 per share. In addition, KKR and GS Capital agreed to not sell or hedge their position for at least one year and to terminate the April 26 agreement litigation or payment of a termination fee.

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

Harman plans to use the proceeds from the KKR/GS Capital investment to repurchase Harman common stock through an accelerated share repurchase program.

"The significant stock repurchase we announced today underscores our board's confidence in Harman's financial outlook," Harman chief executive officer Dinesh Paliwal said in a company news release.

"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."

KKR co-founding member Henry R. Kravis added that while the merger unfortunately could not be completed, "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," Kravis added.

Harman is a Washington, D.C., manufacturer of high fidelity audio products and electronic systems for the automotive, consumer and professional markets.

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