Samsung Electronics has announced that it will buy Harman International Industries (NYSE: HAR) for $112 in cash (a 28% premium to its closing price on Friday) for a total equity value of about $8 billion. The deal will be the largest in Samsung’s history, and will substantially increase its market presence in connected and automotive electronics.
The key facts
In the press release, Samsung describes Harman as “a market leader in connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems.” These systems include embedded infotainment, telematics, connected safety, and security solutions.
Roughly 65% of Harman’s $7 billion in revenues last year came from the automotive market. Its order backlog for the market stood at $24 billion as of June 30, reflecting robust demand for those products, and analysts expect its revenue to rise 7% this year.
Samsung CEO Oh-Hyun Kwon declared that the acquisition “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 key takeaway
Samsung’s expansion into the connected car market isn’t surprising, since many companies that were dependent on the commoditized mobile device market have been heading in the same directio . Mobile chipmaker Qualcomm, for example, acquired IoT and connected car chipmaker CSR for $2.4 billion last year, then agreed to buy NXP Semiconductors — the largest automotive chipmaker in the world — in a $47 billion deal earlier this year.
Samsung’s purchase of Harman will strengthen its device solutions business, which manufactures semiconductors, displays, and other hardware components. Revenue from that unit rose 3% annually last quarter, which didn’t fully offset a 15% sales decline in its struggling IT and mobile communications unit.
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Leo Sun owns shares of Qualcomm.
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