Plantronics Inc. (NYSE: PLT) has agreed to sell its audio entertainment group (Altec Lansing) to Prophet Equity for approximately $18 million in cash.
Plantronics, Inc. (NYSE: PLT) today announced that it has entered into a definitive agreement to sell Altec Lansing, the Audio Entertainment Group of Plantronics, to Prophet Equity LP, a Southlake, Texas-based private equity firm, for consideration of approximately $18 million in cash, net of liabilities assumed, and subject to certain adjustments. The transaction, which was approved by Plantronics’ Board of Directors on October 1, 2009, is expected to close by the end of October.
In concert with the sale of Altec Lansing assets, Plantronics also announced a streamlined functional corporate structure, replacing the matrix it had operated with, to best target the Unified Communications opportunity.
“Unified Communications represents the greatest revenue and profit opportunity in the Company’s history. The reorganization and asset sale represent further steps to focus on our core market, improve the Company’s return on invested capital and enhance time to market and profitability through a simpler organizational structure,” stated Ken Kannappan, President & CEO.
Under the terms of the agreement, Plantronics will retain certain Altec Lansing assets and liabilities as of the closing date, including accounts receivable, accounts payable and certain other liabilities. As a result, the Company expects these net assets to result in additional operating cash flow once the retained working capital assets are monetized in fiscal 2010. Plantronics will also retain assets and/or use of certain assets with strategic value to Plantronics, including the right to use the Altec Lansing brand for specific music applications for three years. As a result of the sale of Altec Lansing, we expect all future and historical AEG segment results to be reported as discontinued operations in Plantronics financial statements beginning in the third quarter of fiscal 2009.
In the quarter ended September 26, 2009, Plantronics has determined that it will be required to record an impairment charge related to its AEG long-lived assets which includes the remaining intangible assets from the Altec Lansing acquisition in 2005 along with potential other long-lived assets within the AEG segment. The impairment analysis is being performed and we currently estimate the non-cash impairment charge, net of the tax benefit, to be in the range of $13 to $16 million.
“Capital freed up by the sale of Altec Lansing will be redeployed to its highest and best use. Our philosophy is to use excess cash to drive stockholder value and the primary vehicle we have used to accomplish this is through stock repurchase programs. Throughout our history, we have bought back over $425 million of stock and are currently executing on our 19th stock repurchase program. We intend to continue to buy back stock on a regular basis with cash beyond domestic requirements,” stated Barbara Scherer, Senior Vice President of Finance and Administration & CFO.
“Altec Lansing contributed to our success in the consumer market, where we are today a Bluetooth headset market leader and we will work hard to ensure a smooth transition for Altec Lansing’s partners and customers. We are confident that Prophet Equity LP will continue to manage the business effectively,” Kannappan concluded.
“Prophet Equity is delighted to be partnering with Altec Lansing at this time in its history, as we believe it is an influential and dynamic company with a bright future in many portable digital audio platforms,” commented Ross Gatlin, CEO at Prophet Equity. “This transaction leverages our operational and strategic toolkit as well as underscores our internal capabilities to execute complex carve outs.” Gatlin added.
George Stelling, COO at Prophet Equity, commented further that “Our team sees Altec Lansing’s compelling audio technologies, its global customer and supply base, and its top notch management team as strengths that are unrivaled in the audio market today. We look forward to helping grow the company, to partnering with Plantronics in the future on new platforms, and to serving Altec’s enthusiastic and loyal customers for many years to come.”
Houlihan Lokey is serving as financial advisor, and Wilson Sonsini Goodrich & Rosati is serving as legal advisor to Plantronics in connection with the transaction.
Plantronics is a world leader in personal audio communications for professionals and consumers. From unified communication solutions to Bluetooth headsets, Plantronics delivers unparalleled audio experiences and quality that reflect our nearly 50 years of innovation and customer commitment. Plantronics is used by every company in the Fortune 100 and is the headset of choice for air traffic control, 911 dispatch and the New York Stock Exchange. For more information, please visit www.plantronics.com or call (800) 544-4660.
About Prophet Equity
Prophet Equity is a private equity firm that uses proven, data-driven analytical techniques coupled with over 100 years of investment and management experience to invest in, unlock and realize future value today. Partnering with owners and management teams, Prophet Equity’s team utilizes a toolkit that is Fortune 500 tested and private equity proven to diagnose and drive dramatic value creation. Portfolio company management teams are highly motivated with clear, uncapped incentives based on realized business performance.
Over the last decade alone, Prophet’s Principals have invested and managed approximately $300 million of control equity in entities with over $2.5 billion in revenue. Their control equity investments focus on lower and middle market companies with strategically strong businesses with significant value creation potential, such as those found in partnerships, corporate carve-outs, divestitures and non-strategic businesses of larger companies. Representative business situations include special situations, succession planning, recapitalizations, reorganizations, turnarounds, acquisitions, mergers and bankruptcies. For more information, please visit www.prophetequity.com or call us at +1.817.898.1500.
Altec Lansing and Plantronics are trademarks or registered trademarks of Plantronics, Inc. The Bluetooth® word mark and logos are registered trademarks of Bluetooth SIG, Inc. and any use of such marks by Plantronics is under license. All other trademarks are property of their respective owners