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(2nd LD) Samsung acquires U.S. automotive electronics firm Harman for $8 bln

2016/11/14 18:58

(ATTN: ADDS quotes, details and photo in last 8 paras)

By Kim Deok-hyun

SEOUL, Nov. 14 (Yonhap) -- Samsung Electronics Co. said Monday it has signed an agreement to acquire U.S. automotive electronics firm Harman International Industries Inc. for about US$8 billion.

With the deal, Samsung will secure "a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung," the company said in a statement.

Samsung will buy Harman for $112 per share in cash or the total equity value of approximately $8 billion, according to the statement.

Kwon Oh-hyun, vice chairman of Samsung, 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."

  

The deal, which would mark the largest-ever buyout of a South Korean company, is the first major acquisition by Samsung since the company's heir apparent, Vice Chairman Lee Jae-yong, joined the board of the electronics giant last month.

About 65 percent of Harman's $7 billion of annual sales are automotive-related and its order backlog for this market at the end of June this year was approximately $24 billion, according to the statement.

The fast-growing market for "connected car technologies" is expected to grow to more than $100 billion by 2025.

Harman is a leading maker of connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems, Samsung said.

Sohn Young, chief strategy officer of Samsung, said in the statement that "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."

  

Analysts said the deal would provide Samsung with a competitive edge in making a foray into the automotive electronics industry amid a tougher competition with global players such as Germany's Bosch and Japan's Denso.

Lee Se-cheol, an analyst at NH Investment & Securities, said that following the acquisition of Harman, Samsung will emerge as a global player in the wireless data services for car, or telematics.

The analyst said the deal would produce a "significant synergy effect," given Samsung's competitiveness in semiconductors, display panels as well as smartphones.

"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," Samsung said in the statement.

Harman took the No. 1 spot in global markets for in-car entertainment system and car audio equipment. The U.S. company also ranked second in the global telematics market.

Dinesh Paliwal, CEO and Chairman of Harman, 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."

   "Today's announcement is a testament to what we have achieved and the value that we have created for shareholders," Paliwal said.

Paliwal said the deal would provide new offerings to customers by "combining Samsung's strength in leading-edge displays, connectivity and processing solutions with Harman's technology leadership and long-standing customer relationships."

  (END)

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