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.