$8.0 Billion Deal
Samsung Electronics will acquire the US-based HARMAN to accelerate the automotive electronics system business and strengthen the audio business. 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.
Samsung Electronics approved the acquisition of HARMAN at the board meeting held on Nov. 14, which costs US$112.00 per share in cash, making the total equity value be approximately US$8.0 billion.
The acquisition is the largest overseas M&A deal in the domestic M&A history. Upon closing, the deal will immediately give Samsung a significant presence in the rapidly growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung. The market for connected technologies, which reached US$45 billion in 2015, is expected to grow to more than US$100 billion by 2025. Approximately 65% of HARMAN’s US$7.0 billion of reported sales during the 12 months ended September 30 this year are automotive-related, and its order backlog for this market at June 30, 2016 was approximately US$24 billion.
HARMAN has premium brands in audio sector, including JBL, Harman Kardon, Mark Levinson, and AKG. The company also licenses Bowers & Wilkins (B&O) and Bang & Olufsen (B&O) brands for automotive as the No. 1 player by occupying a 41% share of the global market.
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, is expected to 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.
“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 Kwon Oh-hyun, Vice Chairman and Chief Executive Officer of Samsung Electronics.
“We see substantial long-term growth opportunities in the auto technology market as the demand for Samsung’s specialized electronic components and solutions will continue 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, said Sohn Young, President and Chief Strategy Officer of Samsung Electronics.
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. 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. This transaction will bring HARMAN and Samsung’s complementary strengths together to accelerate innovation in this space. We look forward to working together with Samsung to elevate experiences for consumers worldwide.”
Samsung Electronics is planning to complete the acquisition by the third quarter in 2017 after obtaining approvals from the shareholders and the governments of the related nations. The company will be managed continuously by the current management as a subsidiary of Samsung Electronics after the acquisition.