Samsung To Buy Harman International Industries
Samsung Electronics acquired Harman International Industries for $8.0 billion on Monday. It was the mark of a major push into auto electronics market. It is one of the biggest overseas acquisition by a South Korean Firm. This latest deal between these companies is a strategic shift for Samsung as the company is trying to break into the automotive industry where it has little track record.
Some sources say that under Jay Y. Lee, Samsung Electronics’ vice chairman, the company is evolving and opening up new ways to grow. It is the first time for such a big M&A deal to take place for Samsung. The purchase of Stamford, a Connecticut-based maker of connected car and audio systems is a part of Samsung’s efforts to expand into new areas of growth. The smartphone business is blotched by the withdrawal of the fire-prone Galaxy Note 7.The automakers have already started working on the development of technologies to enhance the safety of the smartphones and provide better connectivity and entertainment systems. Thus, creating an opening for the tech companies to break into the market of software, services and components. Samsung acquired Harman Industries for $112.00 per share in cash which are 28 percent premium to the firm’s closing price on Friday.
HDC Asset Management Fund Manager, Park Jung-hoon says that Samsung is using its piles of cash to pull ahead of its rivals in the auto technology market. Still, the question is whether Harman would be able to grow into a company that would be able to compete with Bosch and Continental. Harman’s products provide infotainment, telematics, connected safely and security services. They are being used in more than 30 million vehicles made by various automobile makers like BMW, Toyota Motor Corp and Volkswagen, etc.
Harman, the maker of JBL, earns around two-third of its revenue from automotive segment. Its automotive order backlog as of the end of June month was around $24 billion which is more than three times its annual sales of $6.9 billion in the fiscal year 2016. Samsung created a business team for automotive electronics a year ago to identify the growth opportunities in this sector. The company invested $450 million in Chinese automaker and rechargeable batteries firm BYD Co Ltd. this year.
Some sources say that Samsung had had talks with the Fiat Chrysler Automobiles (FCA) over the potential sale or partnership for the latter company’s Magneti Marelli auto parts makers. The current status of these talks is not that clear. The acquisition of Harman International is subject to the regulatory approvals and is expected to be closed by mid-2017.
The deal was announced a day after the media reports state that Lee and some other heads of the South Korea’s family-owned unions were questioned by the prosecutors investigating a political scandal that included the South Korean President Park Geun-hye.