SEOUL - Samsung Electronics agreed to buy Harman International Industries for about US$8 billion (S$11.2 billion) to expand in connected automobiles and reduce its reliance on a slowing smartphone market.
The cash offer values Harman shares at US$112 apiece, Samsung said in a statement Monday. The offer is 28 percent above Harman's closing price of US$87.65 in New York last Friday. 1
Samsung has been expanding into the automotive sector, buying a stake in electric-car maker BYD and considering an offer for sections of Fiat Chrysler Automobiles' parts unit, a deal said to have broken down just weeks ago. While Harman became a legendary name in high-end audio equipment, the company has pushed deeper into automotive supplies and now gets 65 per cent of sales from the sector.
"The deal size shows how desperate Samsung is for a new growth driver," said Greg Roh, an analyst at HMC Investment Securities Co. "Samsung may have figured that it can't become a leader in the car component business by itself, so it needs a big brand to get into the market."
Shares of Samsung fell 2.8 per cent to 1,553,000 won at the close in Seoul before the announcement was made. Samsung said this is the largest ever overseas deal by a single South Korean company.
Samsung said Harman is the market leader in connected car solutions, with more than 30 million vehicles equipped with its connected car and audio systems and telematics. Telematic devices allow in-vehicle access to specific services, including insurance, car parks and anti-theft security. The Stamford, Connecticut-based company has an order backlog for the auto market of US$24 billion as of June 30.
The company's interest in Fiat's Magneti Marelli coincided with its Note 7 smartphone debacle, which resulted in a global recall, the killing-off of the model and is expected to cost the company more than US$6 billion.
"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," Vice Chairman Kwon Oh-hyun said in the statement. "Harman immediately establishes a strong foundation for Samsung to grow our automotive platform."