Samsung to buy Harman for $8 billion

Samsung to buy Harman for $8 billion

Samsung is increasing its focus on the connected car after the Korean firm announced plans to buy auto and audio product maker Harman in an all cash deal worth $8 billion.

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The South Korean smartphone maker said Monday that it would buy U.S. auto-parts supplier Harman International Industries Inc., based in Stamford, Conn., for $8 billion in an all-cash deal that instantly makes Samsung a major player in the world of automotive technology.

Samsung said automotive electronics is expected to grow to more than $100 billion by 2025 and has been a strategic priority for the firm.

The deal, which is subject to approval by Harman shareholders and regulators, is expected to be completed in mid-2017, after which Harman will be a standalone Samsung subsidiary.

The deal—Samsung’s biggest acquisition in its history—reshapes the pecking order in the global automotive supply chain, reflecting a quickening pace of innovation and an increased role for companies with deep pockets and a keen understanding of mobile services.

Harman, an audio pioneer that dates back to 1953, has in recent years pushed aggressively into the automotive world under Chief Executive Dinesh Paliwal, and has secured billions in new business, including big contracts with General Motors Co. and Fiat Chrysler Automobiles NV. It has projected an order backlog of $24 billion, more than three times annual revenue, and about two-thirds of its current sales come from auto makers.

Harman has also diversified into software development and components for connected cars. Much of that has been done on the shoulders of major acquisitions such as a $780 million deal last year for Mountain View, Calif.-based software services company Symphony Teleca.

In a statement, Mr. Paliwa said linking up with Samsung would give the two companies an edge in a competitive field. “Partnerships and scale are essential to winning over the long term in [the] automotive” industry, he said.

By becoming a direct supplier to the world’s biggest automakers, Samsung will gain insight into the changing behavior of consumers as the lines blur between the auto and mobile industries.

“We see substantial long-term growth opportunities in the auto technology market as demand for Samsung’s specialized electronic components and solutions continues to grow,” added Young Sohn, Samsung Electronics president and chief strategy officer.

The announcement comes after a massive recall of Samsung Galaxy Note 7s, which posed a fire risk related to the smartphone's battery. Samsung has also announced a voluntary recall of 2.8 million top-loading washing machines because the top of the machine could detach and cause injury when running a high-speed cycle.