Harman shareholders approve Samsung deal

Harman International Industries’ shareholders approved on Friday a merger with Samsung Electronics, the first move since the two companies announced their intentions in November.

According to Harman International’s regulatory filing with the U.S. Securities and Exchange Commission on Friday, 70.8 percent or 49.5 million of the 69.9 million common stocks were represented in the vote. The merger with the Korean IT company was approved by 94 percent or 46.9 million shareholders represented.

The merger has faced a number of challenges. Last month, some of Harman International’s shareholders filed a class-action lawsuit against the Connecticut-based automotive component and audio supplier, accusing it of failing to seek a better offer. In December, U.S. hedge fund Atlantic Investment, which holds a 2.3 percent stake in Harman International, also announced its objection to the deal.

But the complete merger still faces several obstacles including regulatory approval not only in Korea but also in the U.S., China and Europe.

The arrest of Samsung Electronics’ vice chairman and heir apparent Lee Jae-yong on bribery charges is expected to be the merger’s biggest hurdle.

In fact, if he is charged with bribery, the case could derail the merger. In some countries, such as the U.S., company business activities can be limited when its management is charged with bribery, even if it’s in another market.

The first court ruling on Lee could come as early as April.

Credit rating companies, including Moody’s Investors Service, have brushed off growing concerns over the impact of the arrest on Samsung Electronics’ de facto chief. In a statement Friday, Moody’s said the company’s credit rating remains unchanged at A1.

“We do not expect any disruption to Samsung Electronics’ operations as a result of the arrest, as the company is managed by an experienced and professional management team, and not dependent on a single individual,” said Joe Morrison, Moody’s vice president and senior credit officer. “Samsung Electronics’ credit quality is underpinned by its strong global businesses, low leverages, and large net liquid resources amounting to nearly 73 trillion won at year-end 2016.”

If completed, the deal, worth $8 billion or 9.3 trillion won, would be the biggest Korean merger with an overseas firm.

Samsung’s decision comes amid growing concerns that the company’s smartphone business has reached its limit as the global smartphone market is saturated while competition from Chinese manufacturers is rapidly heating up. The company, therefore, needs to diversify its portfolio for new revenue sources in other growth industries. The acquisition of Harman International allows Samsung Electronics to own leading audio brands such as Harman Kardon, JBL, Infinity and Mark Levinson.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]