Samsung to acquire U.S. auto component maker Harman International

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Samsung to acquire U.S. auto component maker Harman International

Samsung Electronics is acquiring Harman International Industries, an American auto component supplier, for $8 billion, as it seeks to beef up its expertise in the automotive electronics businesses, a new-found growth driver.

The two companies announced Monday they have agreed for Samsung to acquire Harman for $112 per share in cash. That is equal to $8 billion, which translates into 4.3 percent of Samsung's market cap as of Monday.

The deal, scheduled for completion by September 2017 at the latest, will be the largest acquisition by a Korean company of a foreign company.

It should also give the world's No. 1 smartphone, TV and memory chip producer a leading position in the expanding automotive electronics market.

Harman, based in Stamford, Connecticut with 30,000 employees, is a market leader in so-called connected car technologies. More than 30 million vehicles are currently equipped with its connected car and audio systems, including embedded infotainment, telematics, safety and security systems.

"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 Kwon Oh-hyun, vice chairman and CEO 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 closure of the deal, Harman will operate as a standalone subsidiary of Samsung and continue to be led by Harman CEO Dinesh Paliwal and its current management team. Samsung plans to retain Harman's headquarters and facilities as well as all of its consumer and professional audio brands.

Harman's leadership in infotainment, cyber security and telematics, when combined with Samsung's 5G connectivity, display technology and security solutions, is expected to boost sales as automakers scramble to speed up the adoption of next-generation connected cars, Samsung said.

The global market for automotive electronics is forecast to surge to as much as $100 billion by 2025 from $45 billion last year. Harman posted $6.9 billion in sales for the year ended June 30, up 12 percent.

A range of Harman-owned audio brands such as JBL, Harman Kardon and Mark Levinson could also provide a competitive edge to Samsung's mobile, display, virtual reality and wearable products. Harman is the No. 1 car audio supplier with a 41 percent market share.

The Monday announcement comes as Samsung, under the leadership of Vice Chairman Lee Jae-yong, has been snapping up start-ups as well as established enterprises with cutting-edge technologies and growth potential. Samsung relies extremely heavily on a smartphone business that has been losing steam lately.

This year alone, Samsung has acquired five firms abroad, including Viv Labs, an artificial intelligence start-up founded by the creators of Apple's famed Siri, and Dacor, a leading U.S.-based luxury kitchen appliance manufacturer.

Samsung has particularly been ratcheting up investments in auto parts, in-car entertainment systems and autopilot functions, which will comprise a key pillar of the automotive electronics division it established last December.

In a related move, the nation's most valuable company acquired a 2 percent stake in BYD, a Chinese electric vehicle and battery maker, for $455 million in July to boost its chip manufacturing business for electric cars.

Samsung has also been in "advanced" negotiations with Italian carmaker Fiat Chrysler Automobiles to acquire all or part of its auto components unit, Magneti Marelli, for as much as over $3 billion.


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