Samsung to Acquire Harman

Samsung Electronics and Harman International Industries, Incorporated today have entered into a definitive agreement under which Samsung will acquire Harman for $112.00 per share in cash, or total equity value of approximately $8.0 billion. The agreement was announced yesterday.

The main target for Samsung appears to be Harman's connected business. "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," said Oh-Hyun Kwon, vice chairman and chief executive officer of Samsung Electronics. "As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology, and a recognized portfolio of best-in-class products, Harman immediately establishes a strong foundation for Samsung to grow our automotive platform. Dinesh Paliwal [Harman's chairman, president, and CEO] is a proven global leader and, in our extensive discussions, we have developed deep respect for him, his strong senior leadership team, and Harman's talented employees. Harman's sustained track record of rapid growth fueled by technology leadership and an unmatched automotive order pipeline reflects its commitment to innovation and customers."

Samsung will also take possession of Harman's audio companies -- which include JBL, Soundcraft, Crown, Studer, dbx, AKG, Lexicon, and BSS -- and the lighting company Martin by Harman. In a statement, Samsung said, "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."

The statement added, "Upon closing, Harman will operate as a stand-alone Samsung subsidiary, and continue to be led by Dinesh Paliwal and Harman's current management team. Samsung is pursuing a long-term growth strategy in automotive electronics, and plans to retain Harman's work force, headquarters and facilities, as well as all of its consumer and professional audio brands. Samsung believes the combination will increase career development and advancement opportunities for the employees of both companies."

"The purchase price represents a premium of 28% based on Harman's closing stock price on November 11, 2016 and a 37% premium to Harman's 30-calendar day volume weighted average price ending November 11, 2016. Samsung expects to use cash on hand to fund the transaction. The agreement has been unanimously approved by the boards of directors of both companies."

"The transaction, which is subject to approval by Harman shareholders, regulatory approvals, and other customary closing conditions, is expected to close in mid-2017."

"Evercore is serving as financial advisor to Samsung and Paul Hastings LLP is acting as legal counsel. J.P. Morgan and Lazard are serving as financial advisors to Harman and Wachtell, Lipton, Rosen & Katz is acting as legal counsel."