Kohlberg Kravis Roberts and GS Capital Partners VI fund say they are walking away from their eight billion bucks deal to take Harman International private. They claim the current credit crunch is not to blame, but rather that a material adverse change in Harman’s business has occurred, which means they are no longer obligated to complete the buyout. Harman denies that anything has changed, so look for this to head to court post-haste. In any case, shares of the audio equipment maker plunged 24% on Friday after the deal breakup was announced.
TVBR/RBR observation: Investors have good reason to be worried about whether private equity firms will be able to make good on their buyout deals. Financing of mega deals is very tough right now and if the equity guys can find an excuse to slip out of a hard-to-finance deal, they are likely to take it. It still looks like the Clear Channel and Cumulus Media buyouts are solid, and Hearst Corporation certainly has the wherewithal to fund its proposed buyout of the public shareholders of Hearst-Argyle. But new radio or TV deals in the billions or hundreds of millions aren’t likely to take place for a while. American Security is trying to wriggle out of its long-pending deal to buy the biggest block of Clear Channel Radio spin-offs and the word on the street is that Lincoln Financial Media will come off the market after initial bids were disappointing. Nexstar has already been pulled back and LIN Television has slowed down its strategic review because of the credit tightening. Guess that means folks are going to have to just hunker down and make profits from operations.