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Re: Harman International to be Sold to KKR/Goldman Sachs

>The Wall Street Journal has had a number of articles describing the
>tactics of these private equity buy-out firms. First, they load the
>acquired company with huge debt, which they then take for themselves
>as a "dividend," often amounting to a significant fraction of the
>company value. This provides a large instant return.

Wouldn't argue with this, and KKR are the original "barbarians at
the gate" -- you should read the UK press concerning KKR's ongoing
bid to acquire Boots the Chemist -- but the situation is more complex.
Primedia, which owns Stereophile, was created out of a number of
publishing companies that had been acquired by KKR and KKR remains
the primary stockholder. The debt to KKR has been serviced not so
much by asset stripping, as your comments would suggest, but by
selling off chunks of the company when a high sale price was viable,
which in turn means continuing to run those divisions efficiently
with continued investment.

Those who might be concerned that Stereophile and Harman will now be
owned by the same corporate parent should note that Primedia is
about to sell its entire magazine division -- Stereophile, Motor
Trend, Automobile, Home Theater, Shutterbug, etc -- so any potential
conflict of interest will not be an issue (not that it would have
been, given what from my level appears to be KKR's "hands-off"
strategy concerning the day-to-day operations of its investments).

John Atkinson
Editor, Stereophile



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