Trouble at Harman International???

[thekid]

I am sure some of you are aware of this recent news item. Not sure, what, if any effect it will have on Harman or the industry but the statement that the buyers backed out due to a "material adverse change" may be a sign that Harman is in trouble or it could be just a pretense for backing out of the deal due to changing market conditions. I suppose in the long run it might be good that Harman did not go into the hands of one of these investment groups who have a tendency to break up companies and sell them off piece by piece.

From wire reports...
"Harman International (HAR) said that KKR and Goldman's GS Capital Partners VI Fund LP don't intend to complete an $8 billion leveraged buyout of the stereo and audio equipment maker. The companies said they believe there was a "material adverse change" in Harman's business, and that Harman breached the merger agreement. Harman said it disagrees. According to the merger agreement, KKR and Goldman are required to pay a $225 million termination fee for calling the deal off."

[Feanor]

...

From wire reports...
"Harman International (HAR) said that KKR and Goldman's GS Capital Partners VI Fund LP don't intend to complete an $8 billion leveraged buyout of the stereo and audio equipment maker. The companies said they believe there was a "material adverse change" in Harman's business, and that Harman breached the merger agreement. Harman said it disagrees. According to the merger agreement, KKR and Goldman are required to pay a $225 million termination fee for calling the deal off."

Has anyone any idea what this "change" is supposed to be? It could be nothing more than higher interest rates affecting Harmon's debt, or more likely, higher interest rates as it would affect the buyers' leveraging strategy.

[Woochifer]

I'd guess that the housing market freefall has a lot to do with this. Private equity deals are more costly because of tightening credit resulting from the subprime mortgage meltdown. Might have simply been cheaper to pay the termination fee than deal with higher credit costs.

Add to this, consumers now have less equity and less confidence, meaning less big ticket electronics purchases in the short term. Car sales and electronics sales have already slowed down, and that's Harman's bread and butter. If the equity firms wanted to build up Harman's value for an eventual IPO, it's probably not good timing to acquire the company right at the start of a potentially major downturn in the consumer electronics and automotive industries (where Harman's a major OEM supplier). As a company, Harman's doing fine, but the next few years don't look too good for growth and that's what investors look for. I guess Sidney Harman will have to put off his retirement for a while longer.

[Tailwind]

I read that the reason they say Harmon violated the agreement was buy exceeding spending limits set up in the agreement. And that by backing out of the deal Harmon stock dropped 25 percent.

That in itself equals about 2 billion of the 8 that the buyer must have believed Harmon to be worth. Trying to set up to buy them at a much lower price..

If the stock plummeted the most in a decade (as noted in wall street journal) the company could theoretically be worth 25 percent less just because of the backout. Next month you may read that Harmon is being purchased for 5 billion.

More of a leveraged situation. Either way I have been seriously diappointed in Harmons products anyway.

I have communicated with engineers at Infinity (owned by Harmon) that said they had been trying to get the upper level managemant to bring back the Emit and Emim tweeters and midrange drivers and that due to higher petroleum prices (used to manufacture the diaphrams) it was not cost effective even though it is the thing most requested by Infinity followers.

Why would you drop a line of drivers that was rated so high and respected by so many? Only to figure out a way to make speakers with cheaper parts. Well thats what you get ,,,, cheap speakers.

The cmmd cones to me dont compare. Oh well the good old days are gone. They need to adopt the same attitude that was there in the 70's.

Make the best product we can and it will sell. And at the same time we will get all our loyal customers back.

I have not purchased a Harmon or Infinity product since 83. Up until then thats all I bought.

[Sir Terrence the Terrible]

I read that the reason they say Harmon violated the agreement was buy exceeding spending limits set up in the agreement. And that by backing out of the deal Harmon stock dropped 25 percent.

That in itself equals about 2 billion of the 8 that the buyer must have believed Harmon to be worth. Trying to set up to buy them at a much lower price..

If the stock plummeted the most in a decade (as noted in wall street journal) the company could theoretically be worth 25 percent less just because of the backout. Next month you may read that Harmon is being purchased for 5 billion.

More of a leveraged situation. Either way I have been seriously diappointed in Harmons products anyway.

I have communicated with engineers at Infinity (owned by Harmon) that said they had been trying to get the upper level managemant to bring back the Emit and Emim tweeters and midrange drivers and that due to higher petroleum prices (used to manufacture the diaphrams) it was not cost effective even though it is the thing most requested by Infinity followers.

Why would you drop a line of drivers that was rated so high and respected by so many? Only to figure out a way to make speakers with cheaper parts. Well thats what you get ,,,, cheap speakers.

The cmmd cones to me dont compare. Oh well the good old days are gone. They need to adopt the same attitude that was there in the 70's.

Make the best product we can and it will sell. And at the same time we will get all our loyal customers back.

I have not purchased a Harmon or Infinity product since 83. Up until then thats all I bought.

As highly rated as the EMIT and the EMIM drivers are, is as high as their failure rate is as well. This is one of the better kept secrets in loudspeaker history.

[Mr Peabody]

The Emit did not have a failure problem, that is plain BS. First of all a failure rate like you are talking about could not be kept a secret. I worked for a company that sold and distributed Infinity from 87 or so to 93, both home and car products, we had no problems with Infinity returns. I owned a few pair and my last being a pair of Kappa 7's purchased in late 80's whose Emit is still working flawlessly today. I had no problems with my Kappa car audio Emit tweets.