Samsung Electronics is acquiring Harman International Industries for $8 billion

Article by Christian A., on November 18, 2016

South Korean company Samsung Electronics is beefing up its assets and capabilities in order to more properly compete with fellow tech giants Google and Apple in the arena of automotive technology. Thus in this regard, Samsung has determined that Harman International Industries is large enough to allow it to compete side by side its tech rivals. So it has reached a definitive agreement to acquire Harman for $112.00 per share in cash – corresponding to a total equity value of around $8.0 billion.

The boards of directors of both Samsung and Harman have already and unanimously approved the agreement, although the finality of the deal remains subject to approval by Harman shareholders, regulators and other customary closing conditions. Samsung expects to use cash on hand to finance the transaction, which is expected to close in mid-2017.

Harman is considered as the leader in connected car solutions market, as evidenced by the fact that its connected car and audio systems -- including embedded infotainment, telematics, connected safety and security – are fitted in over 30 million vehicles around the world. In addition, around two-thirds of the company sales in its previous fiscal year are automotive-related. Once the deal reaches finality, Harman will operate as a standalone Samsung subsidiary. It will still be under the leadership of current Harman chairman, president and chief executive Dinesh Paliwal and the current management team. According to Samsung, it would retain Harman’s headquarters and facilities, its workforce, and all its consumer and professional audio brands.

Once the acquisition reached a closure, it would allow Samsung to tap into Harman’s strengths and opportunities in several markets. For instance, the acquisition would allow Samsung to further its penetration into the automotive market, especially with Harman’s leadership positions in infotainment, cyber security, over-the-air updates and telematics segments. In addition, the acquisition would make Samsung the new owner of Harman’s innovative audio systems like AKG, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson, and Revel. Samsung will also gain Harman’s licenses for the Bowers & Wilkins and Bang & Olufsen brands.

In addition, the acquisition will provide Samsung access to Harman’s 8,000 software designers and engineers working to further its tap into the connection services market. Furthermore, Samsung’s $8.0-billion acquisition of Harman would enable the South Korean company to expand their business-to-business platform by delivering integrated, large-scale audio and visual professional solutions at concert facilities, stadiums and other performance centers.

Oh-Hyun Kwon, vice chairman and chief executive of Samsung Electronics, called the company’s acquisition of Harman as a natural extension of the automotive strategy that it has been pursuing. He remarked that as a Tier 1 automotive supplier with strong brands and a recognized portfolio of best-in-class products as well as deep customer relationships, Harman serves as a strong foundation for the growth of Samsung’s automotive platform.

Press Release

Samsung Electronics to Acquire HARMAN, Accelerating Growth in Automotive and Connected Technologies

Samsung Electronics and Harman International Industries, Incorporated today announced that they have entered into a definitive agreement under which Samsung will acquire HARMAN for $112.00 per share in cash, or total equity value of approximately $8.0 billion. Upon closing, the transaction will immediately give Samsung a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung, and is expected to grow to more than $100 billion by 2025¹ . HARMAN is the market leader in connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems, including embedded infotainment, telematics, connected safety and security. Approximately 65% of HARMAN’s $7.0 billion of reported sales during the 12 months ended September 30, 2016 are automotive-related, and its order backlog for this market at June 30, 2016 was approximately $24 billion.

HARMAN’s experience designing and integrating sophisticated in-vehicle technologies, as well as its long-term relationships with most of the world’s largest automakers, will create significant growth opportunities for the combined business by enabling it to leverage Samsung’s expertise in connected mobility, semiconductors, user experience, displays and its global distribution channels. In addition, the combination of HARMAN’s brands and audio capabilities and Samsung’s expertise in consumer electronics will deliver enhanced customer benefits and elevate user experiences across Samsung’s complete portfolio of consumer and professional products and systems.

“HARMAN perfectly complements Samsung in terms of technologies, products and solutions, and joining forces is a natural extension of the automotive strategy we have been pursuing for some time,” said Oh-Hyun Kwon, Vice Chairman and Chief Executive Officer of Samsung Electronics. “As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology and a recognized portfolio of best-in-class products, HARMAN immediately establishes a strong foundation for Samsung to grow our automotive platform. Dinesh Paliwal is a proven global leader and, in our extensive discussions, we have developed deep respect for him, his strong senior leadership team and HARMAN’s talented employees. HARMAN’s sustained track record of rapid growth fueled by technology leadership and an unmatched automotive order pipeline reflects its commitment to innovation and customers.”

“The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices over the past decade,” added Young Sohn, President and Chief Strategy Officer of Samsung Electronics. “We see substantial long-term growth opportunities in the auto technology market as demand for Samsung’s specialized electronic components and solutions continues to grow. Working together, we are confident that HARMAN can become a new kind of Tier 1 provider to the OEMs by delivering end-to-end solutions across the connected ecosystem.”

Dinesh Paliwal, HARMAN Chairman, President and CEO, stated, “This compelling all-cash transaction will deliver significant and immediate value to our shareholders and provide new opportunities for our employees as part of a larger, more diversified company. Today’s announcement is a testament to what we have achieved and the value that we have created for shareholders. Samsung is an ideal partner for HARMAN and this transaction will provide tremendous benefits to our automotive customers and consumers around the world. Combining Samsung’s strengths in leading-edge displays, connectivity and processing solutions with HARMAN’s technology leadership and long-standing customer relationships will enable OEMs to provide new offerings for their customers. Partnerships and scale are essential to winning over the long term in automotive as demand for robust connected car and autonomous driving solutions increases at a rapid pace. This transaction will bring HARMAN and Samsung’s complementary strengths together to accelerate innovation in this space. More broadly, this investment underscores the strength of HARMAN’s employees, as well as our success and leadership across our markets. We look forward to working together with Samsung to elevate experiences for consumers worldwide.”

Customer Benefits and Significant Growth Opportunities
Samsung expects the combination to deliver significant growth opportunities and benefits to customers by leveraging Samsung’s and HARMAN’s complementary technologies, resulting in increased market penetration across important end markets.

• Automotive: Combining HARMAN’s leadership in new connected car technologies, including its top positions in infotainment, cyber security, over-the-air updates and telematics, with Samsung’s significant expertise and experience in connectivity technologies, including 5G, UX/UI, display technology and security solutions, will enhance HARMAN’s automotive and connected services businesses to drive greater sales and provide significant benefits as automakers speed the adoption of next-generation connected cars.

• Audio: HARMAN’s leading brands and cutting-edge audio systems include JBL®, Harman Kardon®, Mark Levinson®, AKG®, Lexicon®, Infinity®, and Revel®. The company also licenses Bowers & Wilkins® and Bang & Olufsen® brands for automotive. All of these brands will greatly enhance the competitiveness of Samsung’s mobile, display, virtual reality and wearable products to deliver a fully differentiated audio and visual experience for customers.

• Professional: The combination will also expand the combined company’s business-to-business platform through its ability to deliver integrated, large-scale audio and visual professional solutions at stadiums, concert facilities and other performance centers such as The John F. Kennedy Center for the Performing Arts and STAPLES Center – home of the GRAMMY Awards®.

• Connected Services: Samsung will gain access to HARMAN’s 8,000 software designers and engineers who are unlocking the potential of the IoT market. This collaboration will deliver the next generation of cloud-based consumer and enterprise experiences, as well as end-to-end services for the automotive market through the convergence of design, data and devices.

Operating Structure and Leadership
Upon closing, HARMAN will operate as a standalone Samsung subsidiary, and continue to be led by Dinesh Paliwal and HARMAN’s current management team. Samsung is pursuing a long-term growth strategy in automotive electronics, and plans to retain HARMAN’s work force, headquarters and facilities, as well as all of its consumer and professional audio brands. Samsung believes the combination will increase career development and advancement opportunities for the employees of both companies.

Samsung’s Automotive Electronics Business Team, which was established in December of 2015 to identify opportunities for Samsung in the automotive sector, will work closely with the HARMAN management team to realize the full growth potential of the combination.

Terms of the Transaction
The purchase price represents a premium of 28% based on HARMAN’s closing stock price on November 11, 2016 and a 37% premium to HARMAN’s 30-calendar day volume weighted average price ending November 11, 2016. Samsung expects to use cash on hand to fund the transaction. The agreement has been unanimously approved by the boards of directors of both companies.

The transaction, which is subject to approval by HARMAN shareholders, regulatory approvals and other customary closing conditions, is expected to close in mid-2017.

Evercore is serving as financial advisor to Samsung and Paul Hastings LLP is acting as legal counsel. J.P. Morgan and Lazard are serving as financial advisors to HARMAN and Wachtell, Lipton, Rosen & Katz is acting as legal counsel.

Conference Call/Webcast
On November 14, Samsung and HARMAN will host a webcast presentation to discuss the transaction at 8:00 am EST/10:00 pm KST. Links to the webcast and accompanying documents will be available on Samsung’s Investor Relations website and HARMAN’s Investor Relations website

Additional Information and Where to Find It

In connection with the proposed transaction, HARMAN will file with the Securities and Exchange Commission (the “SEC”) and mail or otherwise provide to its stockholders a proxy statement regarding the proposed transaction. BEFORE MAKING ANY VOTING DECISION, HARMAN’S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION OR INCORPORATED BY REFERENCE THEREIN BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES TO THE PROPOSED TRANSACTION. HARMAN investors and security holders may obtain a free copy of the proxy statement and other documents that HARMAN files with the SEC (when available) from the SEC’s website at and the “Investors” section of In addition, the proxy statement and other documents filed by HARMAN with the SEC (when available) may be obtained from HARMAN free of charge by writing to HARMAN International Industries, Incorporated, Attention: Corporate Secretary, 400 Atlantic Street, Suite 1500, Stamford, Connecticut 06901, or by calling (203) 328-3500.

Participants in the Solicitation

HARMAN and its directors, executive officers and employees may be deemed, under SEC rules, to be participants in the solicitation of proxies from HARMAN’s stockholders with respect to the proposed transaction. Security holders may obtain information regarding the names, affiliations and interests of such individuals in HARMAN’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, filed with the SEC on August 11, 2016, and its definitive proxy statement for the 2016 annual meeting of stockholders, filed with the SEC on October 25, 2016. Additional information regarding the interests of such individuals in the proposed transaction will be included in the proxy statement relating to the transaction when it is filed with the SEC. These documents may be obtained free of charge from the SEC’s website at and the “Investors” section of

Forward-Looking Statements

Statements about the expected timing, completion and effects of the proposed transaction and all other statements in this communication, other than historical facts, constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the following cautionary statements. All forward-looking statements speak only as of the date hereof and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. HARMAN may be subject to certain risks during the pendency of the transaction, and may not be able to complete the proposed transaction on the terms described herein or other acceptable terms or at all because of a number of factors, including without limitation (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, (2) the failure to obtain the requisite approval of HARMAN’s stockholders or the failure to satisfy the other closing conditions, (3) risks related to disruption of management’s attention from HARMAN’s ongoing business operations due to the pending transaction and (4) the effect of the announcement of the pending transaction on the ability of HARMAN to retain and hire key personnel, maintain relationships with its customers and suppliers, and maintain its operating results and business generally.

Actual results may differ materially from those indicated by such forward-looking statements. In addition, the forward-looking statements represent HARMAN’s and Samsung’s views as of the date on which such statements were made. HARMAN and Samsung anticipate that subsequent events and developments may cause their respective views to change. However, although Harman and Samsung may elect to update these forward-looking statements at some point in the future, each specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the views of HARMAN or Samsung as of any date subsequent to the date hereof. Additional factors that may affect the business or financial results of HARMAN are described in the risk factors included in HARMAN filings with the SEC, including HARMAN’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which risk factors are incorporated herein by reference.

This communication also makes reference to HARMAN’s awarded business or “backlog”, which represents the estimated future lifetime net sales for all of HARMAN’s automotive customers. HARMAN’s awarded business does not represent firm customer orders. HARMAN reports its awarded business primarily based on written award letters. To validate these awards, HARMAN uses various assumptions including global vehicle production forecasts, customer take rates for HARMAN’s products, revisions to product life cycle estimates and the impact of annual price reductions and exchange rates, among other factors. The term “take rate” represents the number of units sold by HARMAN divided by an estimate of the total number of vehicles of a specific vehicle line produced during the same timeframe. The assumptions HARMAN uses to validate these awards are updated and reported externally on an annual basis.

1Addressable market in 2025 – Samsung analysis

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