Compromise allows KKR and Goldman to walk away from Harman peacefully

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Posted Oct 22nd 2007 5:35PM by Tom Taulli
Filed under: KKR, Investments, Harman Int'l, 2007

When KKR and Goldman Sachs walked away from the $8 billion buyout of Harman (NYSE: HAR), it looked like there would be a massive legal fight.

But that's been cleverly avoided. KKR and Goldman have agreed to buy about $400 million in Harman's convertible debt. The conversion rate is $104, which means that there is hope that the stock will make a comeback (the current stock price is about $86).

More importantly, KKR and Goldman will avoid paying a $225 million break-up fee.

True, it's not perfect. But, then again, this is a compromise, right? A legal fight would a big drain, in terms of money and time. Besides, this agreement is a sign of a new trend in private equity – that is, making minority investments. With a lack of big-time financing, it looks like private equity firms may have no other choice.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements

Tags: Goldman Sachs, GoldmanSachs, HAR, Harman, Harman convertible debt, HarmanConvertibleDebt, KKR

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