Samsung electronics proclaimed an $8 billion deal on Monday to shop for Harman International Industries, marking a significant push into the auto electronics market and also the biggest overseas acquisition ever by a South Korean firm.
The electronics giant antecedently shunned massive acquisitions, and therefore the latest deal underscores a strategic shift as the company tries to interrupt into the high-barrier automotive trade where it’s very little record.
“An M&A deal this huge is an initial for us. however, it shows that beneath Jay Y. Lee, the corporate is changing and receptive new ways in which to grow,” a source conversant in the deal told Reuters, referring to Samsung Electronics’ chairperson.
Automakers already include or are developing technologies to boost safety and supply higher smartphone property and entertainment systems, making an opening for tech companies to interrupt into a marketplace for software, services and elements.
The purchase of the Stamford, Connecticut-based maker of connected car and audio systems is part of Samsung’s efforts to search out new areas of growth as its mainstay smartphone business – scarred by the calamitous withdrawal of the fire-prone Galaxy Note 7 – slows.
Harman’s products, which give infotainment, telematics, connected safety and security services, are utilized in more than 30 million vehicles created by automakers like BMW, Toyota Motor corp, and Volkswagen, according to its web site.
Harman, the maker of JBL system, earns around two-thirds of its revenue from the automotive-related section, and its automotive order backlog as of end-June stood at $24 billion, quite thrice annual sales of $6.9 billion in the financial year 2016.
Samsung united to amass Harman for $112.00 per share in cash, a 28 % premium to the U.S. firm’s price on Fri.
“Samsung is using its large money pile to tug ahead of rivals in the auto technology market. however it remains to be seen whether Harman is ready to grow into a corporation which will be ready to compete with the likes of Bosch and Continental,” said HDC asset Management fund manager Park Jung-hoon.
Samsung created an automotive electronics business team a year ago to identify growth opportunities in the sector. This year it invested with $450 million in Chinese automaker and reversible batteries firm BYD Co Ltd.
Separately, Samsung has held talks with fiat Chrysler automobiles (FCA) over a possible sale or partnership for the latter’s Magneti Marelli car parts maker, sources have said. the present status of these talks is unclear.
The Harman acquisition is subject to restrictive approvals and is predicted to shut in mid-2017.