Samsung Electronics is set to acquire Harman International Industries, Incorporated for $112 per share in cash, or a total equity value of approximately $8 billion, with the agreement expected to close in mid-2017.
The purchase price represents a premium of 28 per cent based on Harman’s closing stock price on 11 November, 2016 and a 37 per cent premium to Harman’s 30-calendar day volume weighted average price ending November 11, 2016. The agreement has been unanimously approved by the boards of directors of both companies, and Samsung expects to use cash on hand to fund the transaction. The agreement is still subject to approval by Harman shareholders, regulatory approvals and other customary closing conditions.
The deal will give Samsung a significant presence in the market for connected technologies, automotive electronics in particular, which is a strategic priority for Samsung and expected to grow to more than $100 billion by 2025. Approximately 65 per cent of Harman’s $7 billion of reported sales during the 12 months ended 30 September, 2016 are automotive-related, and its order backlog for this market at 30 June, 2016 was approximately $24 billion.
“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. “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. 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 fuelled by technology leadership and an unmatched automotive order pipeline reflects its commitment to innovation and customers.”
Young Sohn, president and chief strategy officer of Samsung Electronics, added: “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: “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.”
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.
With regard to the benefits and opportunities in the audio sector, Harman brands including JBL, Harman Kardon, and AKG will enhance the competitiveness of Samsung’s mobile, display, virtual reality and wearable products to deliver a differentiated audio and visual experience for customers.
As for the Professional side of Harman, the agreement will expand the combined company’s b2b platform through its ability to deliver integrated, large-scale AV professional solutions at stadiums, concert venues and other performance centres.
Samsung will also gain access to Harman’s 8,000 software designers and engineers working in 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.
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.
