D&M Saga Finally Ends With Bain Capital Deal

TOKYO — D&M Holdings' board has agreed to a tender offer by Bain Capital to take D&M private for $442.9 million.

RHJ International, D&M's largest shareholder, also agreed to the takeover. RHJ owns 45.3 million shares, or 48.5 percent of outstanding fully diluted shares.

Once it launches the offer, Bain said it intends to purchase 100 percent of D&M Holdings' shares. Philips is D&M's second-largest shareholder, with about 12 percent of stock.

Ten other major shareholders, including Japanese banks, own most of the remaining stock.

In a related development, Bain Capital joined Kenwood in denying press reports that Kenwood will invest up to $9.3 million in D&M Holdings after Bain Capital takes D&M private.

Bain, which has ownership interests in more than 300 companies worldwide, will launch its tender offer within 25 days of the D&M board's June 19 signing of the tender-offer agreement. Within a few months, D&M will be a wholly owned subsidiary of a holding company that Bain will create, said a spokesperson for D&M North America.

Private ownership, the spokesperson said, will enable D&M-owned brands to focus more on cash flow rather than on earnings and thus "manage a little more long term." In addition, D&M will be able to move more quickly in acquiring companies because it will not be slowed down by stock-exchange paperwork, she added.

No other companies partnered with Bain to make the acquisition, she noted, referring to previous press reports that JVC and Kenwood were joining Bain to make a purchase offer.

D&M Holdings owns brands in the consumer, automotive, commercial and professional audio and video businesses. Brands include Denon, Marantz, McIntosh Laboratory, Boston Acoustics, Snell Acoustics, Escient, Calrec Audio, Denon DJ, Allen & Heath, D&M Professional and D&M Premium Sound Solutions, an OEM provider of mostly car audio systems to automakers.

Bain's proposed purchase price represents a premium of 37.1 percent over the average closing share price in the six months prior to June 19, D&M said in a statement. It also represents a premium of 68.9 percent over the unaffected closing share price on January 23, the day before press reports emerged with "speculation regarding a potential transaction involving the company," D&M said.

In the statement, D&M chairman/CEO Eric C. Evans said, "After an exhaustive review of strategic options, we have determined that this offer from Bain Capital represents the best overall value for our shareholders. The next few years should be an exciting time for D&M as we enter another phase in our development.

"If Bain Capital acquires D&M through the tender offer," he continued, "we believe we will be better positioned as a privately held company to be more flexible in the fast-paced changing markets in which we compete. We will also have wider latitude to invest for medium- and long-term growth."

In addition, the statement said, "Going forward, the company intends to continue its active pursuit of acquisitions and growth in the consumer, commercial and automotive audio video businesses."

The per-share purchase price in price reflects an exchange rate of 107.5 yen to the dollar.

For its part, Bain said it has no plans to sell a stake in D&M to Kenwood after taking D&M private. "Bain Capital would like to clarify that Kenwood is not an investor in the proposed transaction, and there are no discussions or plans regarding a future alliance with D&M at this time," Bain said in a statement.

A Nikkei report claimed that once the buyout is complete, Kenwood would buy a portion of D&M shares from Bain to allow for collaboration in developing car audio products. Nikkei also said that if the partnership turned out to be successful, Kenwood would consider buying more shares.

Separately, in a statement translated into English by D&M, Kenwood claimed that "there had been some media reports ... about our investment in D&M Holdings up to 1 billion yen to make [a] business and capital alliance, but there has been no concrete decision at the moment. We are examining various options to improve our corporate value, but we place top priority on the integration with JVC and putting our maximum effort on it."

In May, Kenwood and JVC announced that they would merge on Oct. 1 after the merger last October of their mobile, home and portable audio businesses.