Samsung Electronics and Harman International announced Monday that they have entered into a definitive agreement under which Samsung will acquire Harman for $112.00 per share in cash, or total equity value of approximately $8.0 billion.
Harman is a key player 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.
Harman’s brands and 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.
Upon closing, the transaction will immediately give Samsung a significant presence in the growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung, and is expected to grow to more than $100 billion by 2025. Approximately 65 percent of Harman’s $7.0 billion of reported sales during the 12 months ended Sept. 30, 2016 are automotive-related, and its order backlog for this market at June 30, 2016 was approximately $24 billion.
Samsung expects the combination to deliver significant growth opportunities and benefits to customers by leveraging the two companies complementary technologies, resulting in increased market penetration across important end markets.
Combining Harman’s position in the connected car technologies, including its top positions in infotainment, cyber security, over-the-air updates and telematics, with Samsung’s 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.
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.
Samsung will gain access to Harman’s 8,000 software designers and engineers who are unlocking the potential of the IoT market. This deal will deliver 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.
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 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 believes the combination will increase career development and advancement opportunities for the employees of both companies.
Samsung’s Automotive Electronics Business Team, which was established last December 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.
The South Korean company expects to use cash on hand to fund the transaction. The agreement has been unanimously approved by the boards of directors of both companies. The transaction, which is subject to approval by Harman shareholders, regulatory approvals and other customary closing conditions, is expected to close in mid-2017.
Evercore is serving as financial advisor to Samsung and Paul Hastings LLP is acting as legal counsel. J.P. Morgan and Lazard are serving as financial advisors to Harman and Wachtell, Lipton, Rosen & Katz is acting as legal counsel.