Samsung to buy car audio systems maker Harman for $8 bn

Samsung Electronics said Monday it would buy US auto parts maker Harman International Industries for $8 billion in a bid to enter the growing market for automotive technology to produce "connected" cars.

Board members of Samsung - the world's largest producer of smartphones - had approved the all-cash acquisition of the Connecticut-based firm for $112 a share, Samsung said in a statement.

Upon closing, the transaction will immediately give Samsung a significant presence in the large and rapidly 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 20251

Harman is the market leader 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. Approximately 65 per cent of Harman's $7.0 billion of reported sales during the 12 months ended 30 September 2016 are automotive-related, and its order backlog for this market at 30 June 2016 was approximately $24 billion.

The deal - the largest by Samsung in terms of value - would give the South Korean giant a "significant presence" in the global market for online-connected auto parts including telematics, the firm said.

"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," Samsung vice chairman Kwon Oh-Hyun said in a statement. "Harman immediately establishes a strong foundation for Samsung to grow our automotive platform."

Samsung expects the combination to deliver significant growth opportunities and benefits to customers by leveraging Samsung's and HARMAN's complementary technologies, resulting in increased market penetration across important end markets.

Automotive: Combining Harman's leadership in new connected car technologies, including its top positions in infotainment, cyber security, over-the-air updates and telematics, with Samsung's significant 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.

• Audio: Harman's leading brands and cutting-edge 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.
• Professional: 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.
• Connected Services: Samsung will gain access to Harman's 8,000 software designers and engineers who are unlocking the potential of the IoT market. This collaboration will deliver the 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.

Dinesh Paliwal, Harman chairman, president and chief executive, said, ''This compelling all-cash transaction will deliver significant and immediate value to our shareholders and provide new opportunities for our employees as part of a larger, more diversified company.''

Harman produces high-end audio systems and other internet-enabled entertainment features for global carmakers including General Motors and Fiat Chrysler.