Samsung just made its biggest international acquisition in the company’s history and it all ties into the auto industry. The Korean tech behemoth has officially put pen to paper on an $8 billion deal to acquire Harman International Industries. The staggering price Samsung paid for Harman was more than enough to fight off Apple and Google and their own respective bids to take over Harman’s businesses.
The price also represented a significant windfall for the Connecticut-based tech company as it stands to receive $112 per share from Samsung, a 28 percent premium of the company’s closing stock price when the deal was formalized in November 11. It is worth noting that the share prices of Harman blew up to around $110 per share when the deal was formally announced on November 14.
The transaction means that Harman International Industries will be absorbed as a stand-alone subsidiary of Samsung and will still be led by the same management team, thus retaining some form of independence from its new parent company.
Given the nature of Harman’s core business of developing and engineering connectivity products for various industries, Samsung saw it as a perfect way to enhance its own status in these respective segments. A big part of Samsung’s objective is to use its own microprocessors and software systems with Harman’s own products, including in-car systems, giving the Korean company access to a massive industry altogether. For those who don’t know, Harman counts JBL, Revel, Lexicon, AKG, Mark Levinson, and Harman Kardon among the brands it owns. It also has licenses with Bang & Olufsen and Bowers & Wilkins brands for the auto industry so this deal essentially puts Samsung right at the heart of the tech and infotainment business of the auto industry.
It’s still unclear how Samsung and Harmon will proceed with the specifics of the new arrangement, but one thing that’s clear at this point is that Korean tech firm will have access to Harmon’s entire roster of designers and engineers numbering around 8,000 people. The $8 billion deal between the two tech giants is expected to be signed, sealed, and delivered by the middle part of 2017.
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Major deal that could reap benefits for all parties concerned
If you don’t think Samsung’s takeover of Harman International Industries is significant, then you should know that the audio systems in your car are likely from Harman and with Samsung now in the fold, that means that the Korean tech giant just made an $8 billion bet to get inside your cars too.
Samsung itself made it clear when it indicated that part of Harman’s appeal that drew the tech company’s interest is its connected car business, an operational ecosystem that ties up a car’s navigation services, onboard entertainment systems, and connectivity into one package. Add that to the surface benefit of getting involved in the car audio system business and it adds up to a big transaction for Samsung because it puts it in a premium position to take control of these specific markets, thus opening its services to a wide expanse of automakers.
If anything, Samsung may have even paid a pittance relative to what other tech companies paid with similar acquisitions. Qualcomm, for instance, signed off on a deal to acquire NXP Semiconductors for a mind-boggling $38.5 billion, allowing it to gain entry into a market that makes new generation of chips for smart cars.
The deal has yet to be finalized - that happens sometime in mid-2017 - but barring any sudden turn of events, this $8 billion sale is going to go down and Samsung will make significant headway into entering the auto industry. It’s a far cry from its previous attempts to do so - remember Samsung Motors? - but this deal does set up the company as a major force in the push towards improved connectivity.