Harman shareholders set to vote acquisition by Samsung

Samsung Electronics’ bid to acquire Harman International Industries still has to be confirmed at U.S. automotive component and audio supplier’s general shareholder meeting.

The meeting is set for 9 a.m. Feb. 17 at the company headquarters in Stamford, Connecticut, and its $8 billion sale to Samsung will receive a green light if 50 percent or more of shareholders vote in favor of the transaction.

Ownership of Harman - the largest acquisition Samsung has made overseas - is expected to propel the world’s No. 1 smartphone maker at a time when global tech firms, having saturated the market, are betting on big revenue and profit in the auto market.

Samsung says the market for automotive electronics is projected to grow to as much as $100 billion by 2025, indicating its focus lies more in hardware than autopilot and smart car operating systems, which smartphone rival Apple has been focusing on.

The prospect of shareholder approval is not entirely rosy. Some shareholders of Harman insist the Korean tech giant is paying too little for the acquisition.

When Harman and Samsung announced the merger on Nov. 14, Samsung agreed to pay $112 per share, adding a 28 percent premium to Harman’s closing stock price on Nov. 11 and a 37 percent premium to Harman’s 30-calendar day volume weighted average price ending Nov. 11.

According to the Delaware Chancery Court, shareholders of Harman filed a class-action lawsuit against Harman CEO Dinesh Paliwal and the board for breach of duty on Jan. 3, accusing them of failing to look for buyers with a better offer than Samsung and agreeing to terms disadvantageous to the company, ultimately hurting investors.

A month prior, U.S. hedge fund Atlantic Investment with a 2.3 percent stake in Harman, announced its objection to the deal. The investment firm’s founder, Alexander Roepers, told the Wall Street Journal in December, “Harman’s highs above $145 in April 2015 are proof that the company’s growth plan announced in August could get the stock to nearly $200.”

A Samsung spokesman said only that the acquisition is a matter to be dealt with by the Harman board.

Paliwal told Korean reporters on Jan. 6 at the Consumer Electronics Show that he had been talking to a lot of major shareholders and they were mostly “satisfied” with the deal, adding that they expect to close the deal in mid-2017 at the earliest.

During a conference call on Jan. 24 as Samsung announced fourth-quarter earnings, Robert Yi, Samsung’s head of investor relations said, “Our stance [regarding Harman acquisition] remains unchanged.”

“Lawsuits on mergers and acquisitions are common in listed companies in the United States,” said Kim Dong-won, an analyst with KB Securities. He anticipates Samsung’s purchase of Harman will proceed as planned, given Samsung and Harman have already won over a sizable portion of shareholders.

As of Sept. 30, the Vanguard Group had the largest stake at 8.99 percent, followed by T. Rowe Price Associates at 7.42 percent, Wellington Management Company at 5.41 percent and JP Morgan Asset Management at 5.24 percent. The top 20 shareholders’ combined stake easily surpasses 50 percent of the entire pie.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]