Samsung announced on Monday that it will acquire US car and audio system supplier Harman International for $8 billion. Samsung will pay $112 a share in cash, a 28% extra over Harman’s closing price last week of $87.65.
Samsung explained the reason behind the purchase is the growing trend in automotive electronics, expected to see a $100 billion growth by 2025. It’s a strategic investment for the Korean tech giant. As for Harman, the company is known for making connected solutions for cars and partenering up over the years with some important top car makers in the industry including Porsche, BMW, Mercedes, Ferrari, Audi and Bentley.
Like its rivals, Google and Apple and their Android Auto and Apple CarPlay, Samsung also wants to tap into the potential of the growing smart car industry. But Samsung is no stranger to this world. Remember the company rolled out Samsung Connect Auto and financially supported startups like Vinli, which is looking to develop a wider app ecosystem for connected cars.
But Harman’s presence is not limited to the car industry. Actually you’re more likely to know Harman’s name from the Harman/Kardon speakers and headphones. The company also licenses Bang & Olufsen for the automotive industry and is behind JBL, AKG, Mark Levinson, Infinity and more.
From this point of view, the Samsung/Harman acquisition seems to be a lot like Apple buying Beats two years ago. So instead of developing its own audio solution to incorporate into future products, Samsung has chosen to buy an established name in the industry.
With the memory of the Galaxy Note7 debacle still alive in the minds of consumers, Samsung might choose to incorporate one of Harman’s audio brands into the upcoming Galaxy S and Galaxy Note models to boost their appeal. The acquisition will probably benefit Samsung’s next-gen wearables and VR products too.
The deal between Samsung and Harman is expected to close by mid-2017, after which Harman will become a standalone subsidiary of Samsung with its structure remaining intact. This means Dinesh Paliwal will continue to be in charge as Chairman, President and CEO.
Will the purchase be worth $8 billion? We’ll just have to wait and see.