M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, October 10, 2007

The Continuing Mystery of Harman

Remember Harman Industries?  Back on Sept 21 its deal to be acquired by Goldman Sachs Capital Partners and KKR spectacularly collapsed.  At the time Harman issued a press release stating:

Harman International Industries, Incorporated (NYSE:HAR - News) announced that it was informed this afternoon that Kohlberg Kravis Roberts & Co. L.P. (KKR) and GS Capital Partners VI Fund, L.P. (GSCP) no longer intend to complete the previously announced acquisition of Harman by a company formed by investment funds affiliated with or sponsored by KKR and GSCP. KKR and GSCP have informed Harman that they believe that a material adverse change in Harman's business has occurred, that Harman has breached the merger agreement and that they are not obligated to complete the merger. Harman disagrees that a material adverse change has occurred or that it has breached the merger agreement.

Since that time Harman has helpfully refused to comment on the status of its merger agreement with GSCP & KKR.  The only mention I could find is a reference in a later press release by Dr. Sidney Harman which referred to KKR and GSCP as its "former merger partners".

Am I the only one who finds this bizarre?  It has now been about two and a half weeks since that initial announcement and Harman has provided no update on the status of its merger agreement or announced its termination.  Technically, the agreement is still in effect and Harman is continuing to operate under it.  Well, that doesn't make sense.  And, if there has been a repudiation of the merger agreement by the buyers without a material adverse change, the buyers are required to pay Harman $225 million. 

If Harman's goal is to move forward from the spectra of GSCP's and KKR's claim of a material adverse change you would have thought they would have dealt with the above issues by now and attempted to collect the $225 million in litigation or otherwise.  Instead, Harman is permitting them to linger in uncertainty.  Harman is already subject to a number of shareholder class actions over alleged faulty disclosure practices during the time of this transaction.  Harman may want to take some lessons from this. 


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