Friday, September 21, 2007

A Harman Crash and Burn - Down About 30%

Depending upon which side of the trade they were on, someone is going to have a great weekend, and someone is going to be hurting.

Wow, Harman (HAR) melts down, falling about $30 to $82.70. KKR and and a unit of Goldman Sachs (GS) are leaving the high end audio equipment maker high and dry and will not complete their $8 bln buyout.

The deal was announced back in April.

As I noted more than a month ago -- yes, indeed -- walking away from buyouts would likely occur in spite of what you may have heard on the cable circuit saying no deals would be broken.

It comes down to this. Would KKR and GS prefer go through with an $8 bln deal on what would surely be onerous borrowing terms, or would they prefer to pay the break up fee of $225 mln. $8 bln, or $225 mln?? Which would you choose?

With another $200 bln in deals in the pipeline, what else is about to fall apart? I'm not saying we're about to see a rash of transactions come undone, but many may end up on the cutting room floor unless they are real cash generating machines.

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