Wall Street powerhouses Kohlberg Kravis Roberts & Co. and Goldman Sachs have decided to pull out of their $8 billion deal to buy Harman International Industries, maker of Infinity and JBL audio equipment, because the company is in danger of losing a key customer.
Shares of Harman plunged 26 percent yesterday to $83 after The Wall Street Journal reported that the deal was in jeopardy.
After the close of the market, the company informed shareholders that KKR and Goldman no longer believe they have to close the merger.
The two private-equity firms had agreed to buy Harman nearly five months ago for $120 a share.
The reason for the two firms abandoning the deal isn’t entirely clear, but rumors swirled yesterday that Harman may lose all or part of its contract with Mercedes-Benz.
DaimlerChrysler, which owns Mercedes, is Harman’s largest customer, according to the car stereo company’s annual report, counting for nearly 25 percent of its $3.6 billion in sales.
Harman noted in its most recent 10-K filing that the loss of Daimler’s business “would have a material adverse effect on our consolidated sales, earnings and financial position.”
Harman said yesterday it disagrees that “a material adverse change” has occurred. According to the merger agreement, KKR and Goldman are required to pay a $225 million termination fee for walking away.
When striking the deal, KKR billionaire Henry Kravis praised Harman’s “unparalleled portfolio” of brands and the “exceptional vision” of its founder, 89-year-old Sidney Harman.
The deal was struck at the height of the private-equity boom and before the global credit crunch hit the market. zachery.kouwe@nypost.com