Audio-equipment maker Harman International Industries
The terms of the deal give Harman shareholders the right to get a stake in a new corporation being formed by the buyers, a so-called "stub" arrangement.
The offer for Harman shareholder to co-invest with the private equity firms follows a similar proposal that was weighed during the recent auction of radio-station operator Clear Channel Communications Inc.
Clear Channel ultimately chose to get a higher amount of cash rather a minority stake alongside the new private owners, yet the consideration of "stub" provisions comes as private equity deals have met increasing resistance from public shareholders, particularly mutual funds.
Some funds have opposed deals to take companies such as Clear Channel and Cablevision Systems Corp.
The takeover offer gives Harman an "excellent value for their shares and the opportunity to participate in Harman's future growth," said Sidney Harman, the company's founder and executive chairman.
Along with with the new buyers, "we will continue to execute our strategic plan, capitalize on new opportunities," Harman said.
Under the terms of the deal, Harman stockholders would receive $120 in cash for each share of Harman they own. That marks a 17% premium over Harman's closing stock price on Wednesday. Shares of Harman surged on the news.
As an alternative to receiving cash, Harman's stockholders could elect to exchange some or all of their Harman stock for shares in a new corporation formed by KKR and GS Capital Partners.
Shareholders of Harman would own a maximum of 27% of that new corporation. The stock of the new corporation will not be listed on any exchange, but will be registered with U.S. Securities and Exchange Commission.
Harman may solicit other bids for a 50-day period ending on June 15.
Earlier, Harman said its third-quarter profit rose, helped by higher sales at its automotive segment. Quarterly net income totaled $71.0 million, or $1.07 a share, compared with $64.0 million, or 94 cents a share, a year earlier. Net sales rose 10% to $882.8 million.
Analysts were expecting the company to earn $1.09 a share, before items, on net sales of $882.5 million, according to Reuters Estimates.
Bank of America Securities, Credit Suisse, Goldman Sachs and Lehman Brothers have committed debt financing for the deal and served as financial advisers to KKR and GSCP. Bear Stearns was Harman's financial adviser.