Harman Group sold

[4345]

NEW YORK (MarketWatch) -- Audio and electronic products maker Harman International Industries Inc. said Thursday it agreed to be acquired by private equity firms Kohlberg Kravis Roberts and GS Capital Partners in a deal valued at about $8 billion.

If anybody in the group has 9 Billion you could outbid KKR.

[Andyoz]

Maybe they'll dig up some old forgotten spare parts in the stocktake :D

[Titanium Dome]

NEW YORK (MarketWatch) -- Audio and electronic products maker Harman International Industries Inc. said Thursday it agreed to be acquired by private equity firms Kohlberg Kravis Roberts and GS Capital Partners in a deal valued at about $8 billion.

If anybody in the group has 9 Billion you could outbid KKR.

Oh no. Anyone know anything about these equity firms? Do they loot a company, then abandon the empty shell?

[Hofmannhp]

Hi All,

about 3,200,001 $ per member......where's the problem

HP

[edgewound]

That explain's the stock's spike on CNBC's ticker....nearly 20%.


See below comments from Business wire:



Dr. Sidney Harman, Executive Chairman and Chief Executive Officer, commented:

"We produced record sales and earnings during the third quarter and the first nine months of fiscal 2007. Automotive continues to invest in research and development to support recently awarded business and Driver Assist technologies. Consumer sales exceeded prior year's quarter but increased competition continues to impede operating profits. Professional delivered higher sales propelled by products utilizing our HiQnet networking protocol. We have identified video presentation as the next major Professional opportunity for us to integrate audio and video controlled from a single remote location."




Sadly....Consumer not doing too well overall.

Pro and Automotive are driving the bus. Pro is a cyclical business, and you can't discount too much the effect of acquisitions.

The current trend in Private Equity target acquisitions is to take a rising performance company, improve the profits of the operation by whatever means necessary that are out of the public's view and scrutiny, then take the company public again.

Dr. Sydney Harman is now in his 80's. Financially, it probably finds the final piece in his puzzle. His time to self actualize....Billionaire....philantropy.

[scott fitlin]

What will become of JBL?

Will they remain an active audio brand? Or, will everything be disposed of in dumping and looting of company assets?

This could really suck.

[Rolf]

Isn't this a OT thread?

Moderators: delete it.

[edgewound]

Isn't this a OT thread?

Moderators: delete it.

C'mon Rolf...get the chip off your shoulder.

If it were a comment on Ford or GM....yeah, OT.

This is the company that owns JBL.

It's relevant.

[4345]

Thanks edgewound. This is important news. I am not sure what effect it may have on JBL products in the future, but it certainly could bring about big changes.

[Rolf]

C'mon Rolf...get the chip off your shoulder.

If it were a comment on Ford or GM....yeah, OT.

This is the company that owns JBL.

It's relevant.

Very well ... ... ...

[John]

If anybody in the group has 9 Billion you could outbid KKR.


Now why in hell would I want to do that if I had that kind of cash???:blink:

[kingjames]

Better grab all the JBl stuff you can find. This doesn't look too good.:no:

[kingjames]

Thanks edgewound. This is important news. I am not sure what effect it may have on JBL products in the future, but it certainly could bring about big changes.

It might also effect this site.

[edgewound]

Better grab all the JBl stuff you can find. This doesn't look too good.:no:


Maybe one should try to look on the bright side. The JBL brand has endured the most tarnishing by being part of a public mutli-national conglomerate.

Privatizing JBL might be the best thing that ever happens to this company.

The cost is no object R&D afforded to JBL with the intro of Everest II could very well have been a component of attracting private equity.

Billionaire investors do like their toys....expensive one's too.

Lot's of investment bankers notice 60 year old brands, and what they should be capable of.

I'd like to think the cheap junk will minimize, while the hi end gets a good polishing. The profit margins are way higher per unit sold, and I'm not talking just the stratospheric Everest II prices.

More and better marketing needs to be done to show products like Project Array and the other neat stuff not even offered here.

The market for JBL's upper end $4k-$5k offerings in Japan need to be offered here.

Oh yeah...I bet the financial performance from Project Everest hasn't even hit the books yet. Investment bankers have this habit of looking ahead.;)

[louped garouv]

I hope it works out for the better of JBL and the other audio companies.......
:)

seems to be a lot of private money flowing lately, didn't Harrah's (casinos) just get brought back to private-owned status from being public?

[Donald]

Well, I have the $1. Several in fact.


Hi All,

about 3,200,001 $ per member......where's the problem

HP

[Cyclotronguy]

Was reported yesterday in the Wall Street Journal that Harmon International... Parent Company of JBL was sold for 8 Billion and change.

[4313B]

Yes, there is another thread around here posted yesterday. Look up the buyers involved and look up Beatrice.

[scott fitlin]

The threads have been merged. :)

[edgewound]

Was reported yesterday in the Wall Street Journal that Harmon International... Parent Company of JBL was sold for 8 Billion and change.


Read today's WSJ, front page, right column....it's not a done deal. Shareholder's would have to be willing to have their investment tied up indefinitely until the company is resold. Sounds like a deal only for the already rich that wouldn't need liquidity on the open market.

Here's an easy link to the NYTimes.

http://www.nytimes.com/2007/04/27/business/27audio.html?ex=1335326400&en=9f9667d221f33bd3&ei=5088&partner=rssnyt&emc=rss

[boputnam]

Oh no. Anyone know anything about these equity firms? Do they loot a company, then abandon the empty shell?:no:

edge has it...


...Private Equity target(s) ... (to) improve the profit of the operation by whatever means necessary ... then take the company public again.

The only part I'd change is:
...take a rising performance company...That is not always the case. They often find companies whose enterprise value (read: potential) is not reflected in the publicly trading valuation.

Public companies have many costly compliance and reporting requirements. In being private, management avoids these and can focus solely on the business, right-sizing things and measuring ROI/ROE across all business lines.

These actions may result in some "harsh" decisions - spinning off (selling) less profitible business lines, for example, closing OT, etc. Some business lines can be strengthened, focussing on consumers, "differently". This may not bode well for the pro line, whose client base is limited in numbers; that said, KKR bight see with right-sizing pro (reducing the number / variety of offerings) they can make it more competitive, increase ROI/ROE, even if sales are relatively small. By not reporting to, or needing vote of public shareholders, the process is streamlined.

-----

The only issue is, private equity firms these days are sloshing with cash so there are more deals being done, and greater competition amongst PE firms to find deals. Thus, PE are doing deals outside their normal genres and at steeper valuations. The expectations for high returns is very high, and none want their capital tied-up for too long. This could lead to abrupt changes in the world of our namesake company. Wish them good fortune... :yes:

[doyall]

... This could lead to abrupt changes in the world of our namesake company. ...

As in JBL becoming a Japanese company?

[boputnam]

We can't know.

There are lots of product overlap throughout the Harman family - some could be sold, some merged. Why maintain Revel and JBL and have them compete? Nonsense. Much of dbx competes with BSS. Pro and consumer lines of drivers? Nonsense, and expensive to support. Sure, EV and others do the same, but no-one it seems has the multiplicity of JBL.

Simpler product lines might get more core product adopted by more third-party makers, for instance. Reducing the redundancy will strengthen brand awareness, and possibly loyalty.

We can't know, other than "it" will be vastly different. Much of the redundancy will be gone - some of it will be dearly missed.

We can only hope "our gang" in JBL design will be protected and invited to be involved in the transformation...

[edgewound]

As in JBL becoming a Japanese company?

...or....God forbid....A Chinese company.

If you look at the organization chart for Harman, JBL is not a manufacturer anymore. It hasn't been for some years. It's a brand of it's parent company. Harman Manufacturing owns the tooling that makes JBL products.

The KKR/GSG people seem to be eyeing the Harman Automotive business and what the future holds in store for it's mobile and telematic systems.

First of all....the shareholders must agree on an acquisition for the sale to take place.

Secondly....Harman shareholders are of the opinion that the offer is way too low.

Expect to see the ante upped in the months ahead.

I just saw Bo's mention of E-V. It's now owned by Bosch since last year....now known as Bosch Communications.

[4313B]

Secondly....Harman shareholders are of the opinion that the offer is way too low.Which ones? The offer is high enough that a buyout to dismantle might not be in the cards. Anyone else know the KKR/Beatrice story?

[edgewound]

Which ones?

That was the opinion mentioned in a WSJ article. That's why the share price jumped up to $122 yesterday. Market's reaction in looking to bid up the value to $150-$160/share.

[kingjames]

In an extreme case this site could disappear or name removed as this company now own's the JBL Name and I was concerned about the Off topic area. Seems so little now!

[edgewound]

Which ones? The offer is high enough that a buyout to dismantle might not be in the cards. Anyone else know the KKR/Beatrice story?

KKR acquired Beatrice, which at the time owned JBL. KKR sold off the subsidiaries, one of them being JBL to Harman for $55 million.

The way the two companies are organized, though is a bit different.

Harman's become the mother cow for lot's of these brands, and cutting off teats at a time would be fatal to some brands....like starting all over again.

[Ian Mackenzie]

Edge,

Is Harman Japan in fact part of this?

In some respects all this would make sense (b/n the lines) if it wasn't.

Ian

[edgewound]

Edge,

Is Harman Japan in fact part of this?

In some respects all this would make sense (b/n the lines) if it wasn't.

Ian

Do you mean on the "buy" side? I have no idea.

I would suspect that Harman Int'l means ALL the divisions and subsiaries are being the acquisition target.

Harman itself, went on a buying spree and then "streamlining" and "leaning out" operations and inventory.

A couple of companies that refused the lean treatment and benign neglect from Harman were Turbosound and Rivera Research and Development.
They saw the writing on the wall and got back to their own business when they saw what was happening to them...being absorbed.

The brands that Harman owns are probably fully digested now. They'd most likely have a struggle on their own, unless given big shots of capital to rebuild their mfg capabilities.

Don't take my opinion as gospel....this is just how I see it. I don't have any "inside information" to disseminate.

[4313B]

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

[edgewound]

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


Read it...doesn't disclose much yet.

Dr. Sidney Harman is also going to continue running the company. Keep in mind that he is 88/89 years old. He still looks pretty good, but c'mon....reality check here, k?

[kingjames]

Somebody fix the title of this thread, please.

[It's embarassing.... :blink: ]

Maybe he meant Harmony instead of Harman?:thmbsup:

[mikebake]

Come whatever, life goes on.

[Titanium Dome]

Read it...doesn't disclose much yet.

Dr. Sidney Harman is also going to continue running the company. Keep in mind that he is 88/89 years old. He still looks pretty good, but c'mon....reality check here, k?

There's more in this Washington Post article, including


Harman, 88, an author and philanthropist who is married to Rep. Jane Harman (D-Calif.), will roll over about half of his 5 percent share of Harman International into the new company, of which he will be chairman, according to Harman Chief Financial Officer Kevin L. Brown.

http://www.washingtonpost.com/wp-dyn/content/article/2007/04/26/AR2007042600853.html?hpid=sec-business

[Ian Mackenzie]

Those white papers under tech leadership will make nice reading over brunch!

[scott fitlin]

There's more in this Washington Post article, including



http://www.washingtonpost.com/wp-dyn/content/article/2007/04/26/AR2007042600853.html?hpid=sec-businessI read the article, and you cant argue with the fact that Sidney Harman is just about 89yrs old.

I hope JBL stays an active brand for a long time. It would be such a terrible waste if JBL went the same way Altec did.

Time will tell.

[Titanium Dome]

Well, it is a bit of an odd arrangement:

http://www.harman.com/press/pdf/harman-kkr.pdf

I wonder how Dr. Sidney and the equity boys will get along?

[edgewound]

Well, it is a bit of an odd arrangement:

I wonder how Dr. Sidney and the equity boys will get along?





Time will tell.
.

[hjames]

http://media3.washingtonpost.com/wp-dyn/content/photo/2007/05/01/PH2007050101896.jpg (http://javascript%3cb%3e%3c/b%3E:void%28popitup%28%27http://www.washingtonpost.com/wp-srv/photo/postphotos/orb/sports/2007-05-02/index.html?imgId=PH2007050101898&imgUrl=/photo/2007/05/01/PH2007050101898.html%27,650,850%29%29)
Sidney Harman



WaPo Weds May2, 2007 - http://www.washingtonpost.com/wp-dyn/content/article/2007/05/01/AR2007050101745.html?hpid=sec-business

Harman Buyout Hinged on Option to Buy In

Firm's Founder Wanted To Protect Its Investors

By Thomas Heath
Washington Post Staff Writer
Wednesday, May 2, 2007;

When private-equity bankers Kohlberg Kravis Roberts phoned Sidney Harman last November to make a pitch for buying Harman International, Harman turned them down flat.

He didn't want "mountains of debt" piled onto the balance sheet of the audio and navigation system company he had built over decades, he said, and he wanted owners of Harman stock to share in a piece of any new business.

When KKR called back later, putting up half the purchase price in cash and offering Harman stockholders a chance to take some stake in the new firm, they had a deal. By the time Harman's board of directors approved the sale last month, a new form of private equity was born, allowing ordinary investors in public companies to keep a piece of the business after it is bought out and taken private.

"If I can figure out how to take full credit for it, I will," Harman said yesterday in his first interview since the sale was announced last week. "We knew it was going to be an innovative approach."

The $8 billion deal created a stir on Wall Street, where private-equity firms such as KKR, Carlyle Group and Blackstone Group have been under scrutiny for buying public companies at a premium, then taking them private and frequently selling them for a bigger profit, leaving some shareholders feeling shortchanged.

The deal, which includes KKR and the private-equity unit of Goldman Sachs, would allow holders of up to 8.3 million shares in Harman a choice: Take shares in the new company or $120 per share in cash. Based on the cash-offer price, the new shares would be worth about $1 billion, or 27 percent of the equity value of the new company. Some have called the rolled-over shares "stub equity."

The Harman sale contains a provision, known as a "go shop provision," that allows the Harman board of directors 50 days to entertain offers from others. Harman declined to comment on whether other potential buyers have come forward.

District-based Carlyle pioneered a similar private-equity buyout two years ago, according to Carlyle spokesman Chris Ullman. In April 2005, Carlyle and its energy affiliate, Riverstone Holdings, offered shareholders of Netherlands-based Petroplus the choice between cashing out at 12 percent above the share price or rolling their ownership stake into the new entity. Only 2.2 percent of shareholders bought into the new firm, with the rest cashing out, Ullman said.

"Allowing current shareholders to roll over their ownership into the new company emasculates the key criticism of these types of transactions," Ullman said.

Harman, who owns about 5 percent of the company's shares, said the company's major investors, such as T. Rowe Price and Fidelity Management & Research, had told him before and after KKR first approached him that they were confident in the company and saw great promise in its future. So Harman and the board were encouraged to pursue an unusual deal.

"The architecture of the deal is meant to say to [investors], 'If you really think well of this company, come join us through this mechanism in continuing to own some equity in it,' " Harman said. "From the beginning, I was determined to align myself with the shareholders. Thus, I wanted and was offered no deal different from what any other shareholder would get."

Harman has more than $400 million in the company, based on the $120 per-share purchase price offered by KKR and GS Capital Partners. He will take out half and put up half, or about $200 million, into the new entity.

Harman, an author and philanthropist who is married to Rep. Jane Harman (D-Calif.), graduated from City College of New York, has a doctorate and was a deputy commerce secretary under President Jimmy Carter. In 1953, Harman Kardon, as the company was then known, produced its first product, a wooden box filled with electrical equipment and known as the FM tuner. Five years later, the company made the Festival TA230, the world's first stereo receiver.

Harman went on to produce cutting-edge electronic equipment from high-tech home audio systems to concert hall and movie theater sound systems to automobile infotainment digital platforms.

The sale comes less than a year after Harman's chief executive, Douglas A. Pertz, was let go with a $3.8 million severance package after only four months on the job. The company, maker of JBL, Infinity and Harman Kardon audio equipment, has more than 10,500 employees worldwide but only about 30 at its Pennsylvania Avenue headquarters.

Harman said yesterday that he will name a new chief executive within two weeks.

"I am in splendid health," said the 88-year-old chairman. "I am totally vigorous. I thoroughly enjoy what I am doing, and I think this is an utterly fascinating business."

But he added, "I've got to think about the future of this beautiful company and not just let the fates take care of it. It is very important to ultimately find a secure harbor for it. A place for people who thought well of its mission, its character and who would honor all of that. That attitude is important to me."

[Titanium Dome]

Heather

Thanks for that. Interesting read.

[kingjames]

After reading this article brought to our attention by Heather, I'd have to say that Mr. Harmon is definately a CLASS ACT! It does look like JBL will be around for awhile more and this is a good thing.

[4313B]

Thanks for posting that Heather! :)

[jblbgw_man]

These private equity funds are driven by the dollar only, nothing else. JBL won’t disappear but my bet is that support for the vintage stuff will diminish or the catalogue of vintage parts will be severely reduced. They can’t and won’t support stuff that is too old irrespective of what standing these components had in the audio world, money men don’t understand this. Grab what you can now, don’t forget what happened to Revox. Hate to be negative, but I would rather be negative and still have my own stockpile of components than take the risk, I get way too much enjoyment out of my JBL stuff to risk having to give up on it....... My two cents !!