Samsung Electronics has entered into a definitive agreement to acquire Harman International Industries for approximately $8 billion. The acquisition, set to close in mid-2017, signals the mobile phone giant's expansion into automative and connected technologies.
“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,” said Young Sohn, President and Chief Strategy Officer of Samsung Electronics in a press statement. “We see substantial long-term growth opportunities in the auto technology market as demand for Samsung’s specialised 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.”
The deal comes on the heels of recent bad press for Samsung, whose latest smart phone, the Glaxay Note 7, has been discontinued after several reports of the phone catching on fire — a malfunction that has cost the company $2 billion dollars in profit.
Reporting in the New York Times,
Amie Tsang noted that, "Samsung’s $112-a-share offer for Harman represents a 28 percent premium from where its shares traded on Friday, but that is still well below the roughly $145 that each Harman share was fetching early last year. Harman’s results from its professional solutions business — which makes sound and lighting for concerts and other events — have weakened. The company has said it will work to bring the operations back to their previous strength."
Upon closing, HARMAN will operate as a standalone Samsung subsidiary, and continue to be led by Dinesh Paliwal and HARMAN’s current management team. Samsung said in its press release that it is pursuing a long-term growth strategy in automotive electronics, and plans to retain HARMAN’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.