Samsung Electronics and Harman International Industries have entered into a definitive agreement that will see Samsung acquire Harman.
The agreement (US$112.00 per share in cash, or total equity value of approximately US$8bn) opens the door for Samsung to establish ‘a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics’, which is a strategic priority for the Korean corporation. Approximately 65% of Harman’s US$7bn of reported sales during the year to 30 September 2016 are automotive-related, and its order backlog for this market at 30 June 2016 was approximately US$24bn.
‘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 CEO of Samsung Electronics on the announcement. ‘As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology and a recognised portfolio of best-in-class products, Harman immediately establishes a strong foundation for Samsung to grow our automotive platform.’
‘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 specialised 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: ‘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. 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.’
The acquisition includes Haran’s stable of professional audio brands (Soundcraft Studer, JBL, AKG, Lexicon, dbx and DigiTech), as well as its consumer audio presence (Harman Kardon, Mark Levinson Infinity and Revel). Additionally, Samsung will gain access to Harman’s 8,000 software designers and engineers who are unlocking the potential of the IoT market.
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’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.
The purchase price represents a premium of 28% based on Harman’s closing stock price on 11 November 2016 and a 37% premium to Harman’s 30-calendar day volume weighted average price ending 11 November 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.
