Harman Industrial acquires Bang & Olufsen for $156 million

Article by Andrew Christian, on June 1, 2015

For $156 million, Harman Industrial Industries Inc. has completed its acquisition of Bang & Olufsen Automotive. The deal was first announced last March by Harman, which supplies infotainment, audio and software services. Bang & Olufsen Automotive is a known supplier of audio products to luxury automakers.

In a Bloomberg report last March, we learned that it will cost Harman a total of 145 million euros ($156 million) to acquire the unit as well as pay for the technology license fees. Bang & Olufsen A/S shared that it intends to sell its automotive sound-system business to Harman International Industries Inc. (U.S. maker of JBL audio equipment) as it undergoes a reorganization to concentrate on consumer electronics.

After the announcement was made, the stock of Bang & Olufsen stock rose to its highest level in nearly 25 years. In a separate report, Bang & Olufsen said that it will sell its minority stake in drug-dispensing equipment maker Medicom and is considering options for its ICEpower amplifier unit.

Last December, Danish newspaper Berlingske reported that Ole Andersen, the chairman of Struer-based Bang & Olufsen, said that the company is too small to remain independent and so it must either look for partners or scale back business areas.

In a statement, Bang & Olufsen said that to lessen the complexity within the company and to put its focus on the consumer business, it sought to make a further assessment of ownership of assets that are not core to this strategy.

Because of this deal, a 40% surge was experienced by Bang & Olufsen to 70 kroner, the most sudden intraday increase since at least April 1990. This year, the stock has gained 87%.

The Danish company said that Harman, which makes AKG and Harman Kardon systems, will have to pay the annual fee of at least 12.7 million kroner ($1.82 million) to exclusively use Bang & Olufsen and B&O Play stereo technology in vehicle sound systems over 20 years.

Harman plans to offer the Bang & Olufsen products to manufacturers of high-end cars and target B&O Play to the “mass luxury market.”

This agreement means that Harman gains automaking customers like BMW AG, Volkswagen AG’s Audi division and Daimler AG’s Mercedes-Benz brand. Bang & Olufsen will be able to keep its namesake brand and B&O Play for consumer sound systems according to the terms of the deal.

Topics: harman, bang olufsen

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