Though Harman is best known for its car audio systems, Samsung is most attracted to its connected car business, which aids a car’s navigation services, onboard entertainment systems and connectivity.
Upon closing, the transaction will immediately give Samsung a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung, and is expected to grow to more than $100 billion by 2025, the companies said Nov. 14 in a joint statement.
“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,” Samsung Electronics president and chief strategy officer Young Sohn said in a statement.
The $112-per-share offer for Harman — a significant uptick from its recent share value though a steep downgrade from its shares’ value early 2015 — promises to put Samsung on the cutting edge of connectivity and IoT in cars.
Among other benefits to the deal, Samsung can learn firsthand from Harman what it needs to do to sell its screens, chips and memory to carmakers, it said.
Harman’s results from its professional solutions business — which makes sound and lighting for concerts and other events — have weakened. The company has said it will work to bring the operations back to their previous strength.
Harman is among the market leaders in connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems, including embedded infotainment, telematics, connected safety and security.
The majority of its reported sales are automotive related.
Despite Samsung’s acquisition, which expects to close in mid-2017, it is still expected that Harman facilities will remain intact, including chairman and chief executive officer Dinesh Paliwal.
A graduate of the Indian Institute of Engineering in Roorkee and Miami University, Paliwal has served in his role with Harman since July 2007, according to his LinkedIn profile. Prior to Harman, the Indian American executive was president of ABB Automation globally and president of ABB.
In addition to Paliwal, Samsung said that it would also have access to Harman’s designers and engineers, which would allow for more collaboration.
“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," Paliwal said in a statement. "Samsung is an ideal partner for Harman and this transaction will provide tremendous benefits to our automotive customers and consumers around the world."