A Good News amid Ordeal
Despite the absence of Samsung’s heir apparent Lee Jae-Yong right now, Samsung Electronics has practically acquired Harman International Industries, the largest electronics equipment maker in the world. The shareholders of Harman International voted to approve the company’s merger with Samsung Electronics at an extraordinary general meeting in Stamford City of the U.S. on Feb. 17 (local time). Samsung Electronics plans to receive approval from the government and wrap up the deal by no later than the third quarter of 2017.
Earlier, some of Harman International’s shareholders filed a class-action lawsuit against the automotive component and audio supplier, accusing it of failing to seek a better offer. This is why some market experts expected that the merger would face a number of challenges. Also, there were fears that Lee’s arrest on charges of bribery would derail the merger vote, but it didn’t seem to have affected the vote. Accordingly, Samsung Electronics, which is now in crisis due to the absence of the head, can now catch its breath.
According to Harman International’s regulatory filing with the U.S. Securities and Exchange Commission, 70.8 percent or 49.5 million of the 69.9 million common stocks were represented in the vote. The final count saw 47 million shares voted in favor of the deal, and 21 million shares against. Also, 430,000 abstentions were counted. The motion can be carried with more than 50 percent of a vote in favor. Under the current law, shareholders who opposed to the merger are required to sell their shares when a majority of shareholders vote for it. Samsung will pay a total of US$8 billion (9.2 trillion won) for Harman International, which is the largest overseas M&A deal ever negotiated by a Korean company.
The merger is still dependent on anti-trust regulatory approval in the U.S., the EU, China and Korea. In the EU and China, certain anti-trust restrictions could be demanded by government agencies in exchange for the deal's approval as the two countries are the main markets in where Harman’s products are sold. The anti-trust regulations are applied when there is a monopoly or a possible abuse of monopoly power in specific business and product sectors through an M&A between companies. However, Samsung Electronics is a new runner in the automotive electronics sector. There is an overriding prediction that Samsung will be free from the monopoly issue even with the merger with Harman International. Harman will also be continuously run by the current management as a subsidiary of Samsung Electronics after the merger.