Samsung Electronics and Harman International Industries, Incorporated announced this morning they have entered into a definitive agreement under which Samsung will purchase HARMAN for $112.00 per share in cash, or total equity value of approximately $8.0Bn. Samsung expects to pay in cash.
The agreement has been unanimously approved by the boards of directors of both companies, but the transaction, is still subject to approval by Harman shareholders, regulatory approvals and other customary closing conditions, so it is not expected to close before mid-2017.
Once closed the transaction Samsung will immediately acquire a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics.
The he IOT field is a strategic priority for Samsung, as this market is expected to grow to more than $100Bn by 2025.
Harman is a 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.
Approximately 65% of Harman’s $7.0Bn of reported sales during the 12 months ended September 30th, 2016 are automotive-related, and its order backlog for this market at June 30, 2016 was around $24Bn.
The purchase price represents a premium of 28% based on Harman’s closing stock price on November 11th, 2016 and a 37% premium to Harman’s 30-calendar day volume weighted average price ending November 11th, 2016.
Dinesh Paliwal keeps on as Harman Chairman, President and CEO
“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 Chief Executive Officer of Samsung Electronics. “As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology and a recognized portfolio of best-in-class products, HARMAN immediately establishes a strong foundation for Samsung to grow our automotive platform.”
Upon closing, Harman will operate as a standalone Samsung subsidiary, and continue to be led by Dinesh Paliwal and the current management team. Samsung is pursuing a long-term growth strategy in automotive electronics, and plans to retain This company’s work force, headquarters and facilities, as well as all of its consumer and professional audio brands.
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.
More than a connected vehicle opportunity for growth
“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 specialized 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.”
But further, Samsung expects the combination of both companies 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, namely Automotive, Audio, Professional and Connected Services.
Automotive: Combining Harman’s leadership in new connected car technologies, including its top positions in infotainment, cyber security, over-the-air updates and telematics, with Samsung’s significant expertise and experience in connectivity technologies, including 5G, UX/UI, display technology and security solutions, will enhance HARMAN’s automotive and connected services businesses to drive greater sales and provide significant benefits as automakers speed the adoption of next-generation connected cars.
Audio: Harman’s leading brands and cutting-edge audio systems include JBL®, Harman Kardon®, Mark Levinson®, AKG®, Lexicon®, Infinity®, and Revel®. The company also licenses Bowers & Wilkins® and Bang & Olufsen® brands for automotive. All of these brands will greatly enhance the competitiveness of Samsung’s mobile, display, virtual reality and wearable products to deliver a fully differentiated audio and visual experience for customers.
Professional: The combination will also expand the combined company’s business-to-business platform through its ability to deliver integrated, large-scale audio and visual professional solutions at stadiums, concert facilities and other performance centers such as The John F. Kennedy Center for the Performing Arts and STAPLES Center – home of the GRAMMY Awards®.
Connected Services: Samsung will gain access to Harman’s 8,000 software designers and engineers who are unlocking the potential of 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.
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”.
Image over the headline.- Harman’s connected car system and services. © Harman.