British rival agrees to buyout by Polk Audio

September 26, 1990|By Maria Mallory

Polk Audio Inc. will double its size and gain a major foothold in Europe by acquiring AGI Electronics Ltd., a British competitor in the loudspeaker market, the two companies announced yesterday.

The proposed transaction will include the exchange of an undetermined amount of cash and Polk stock for the common stock of privately held AGI.

The exact terms of the merger have not been ironed out, but a letter of intent was signed Monday by both parties, said George M. Klopfer, president and chief executive officer of Polk, which is based in Northeast Baltimore.

"Once we've executed the definitive agreement, then we will disclose the price and terms -- probably within the next 30 to 60 days," Mr. Klopfer said yesterday.

After that, Polk shareholders will receive proxy statements explaining the details of the acquisition, which cannot be consummated without their approval.

AGI, with headquarters in Maidstone, Kent, in southeastern England, is the holding company for KEF and Meridian brands of audio and video equipment. Eighty percent of AGI's outstanding common stock is owned by its top executives, who will stay to manage the company after the acquisition, Mr. Klopfer said.

The Polk-AGI combination would position the Baltimore-based company to continue its growth streak by expanding into overseas markets, Mr. Klopfer said. Last year, 75 percent to 80 percent of Polk's $27.5 million in revenues came from domestic sales, he said.

"In order to keep growing, we are going to have to get more involved in Western Europe," said Mr. Klopfer, who anticipates greater growth opportunities following the consolidation of European markets in 1992.

Joining forces with a foreign company was the best way to "leapfrog" some of the steps in setting up shop overseas, he said. With $25 million to $30 million in revenues, the KEF brand alone is sold in about 45 countries, Mr. Klopfer said.

Polk is free of bank debt, and its managers will proceeconservatively in financing the AGI deal, Mr. Klopfer said.

"Our philosophy is to keep leverage down to a minimum," he said. "We don't want to do a highly leveraged or "junk" bond deal because so many of those are unraveling now."

Polk stock, traded on the NASDAQ exchange, closed up 12.5 cents yesterday at $35.625.

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