Samsung can’t be hurting too badly from its Galaxy Note problems – the company has announced it is acquiring Harman International for a cool $8bn in cash.
“Samsung Electronics and Harman International Industries, Incorporated today announced that they 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,” says a joint release from Samsung and Harman, dated Nov 14.
In the audio market, that gives Samsung all Harman’s brands: JBL, Harman Kardon, Mark Levinson, AKG, Lexicon, Infinity, and Revel.
Samsung and Harman are not without connections. Samsung Research America already includes key personnel such as Allan Devantier, Vice President of Audio R&D at Samsung in Los Angeles, who was previously with Harman from 1992 to 2013, including stints with JBL Consumer (his LinkedIn page includes a recommendation from the great Greg Timbers), with Infinity, and most recently as overall Manager of Acoustic Research. Devantier currently heads up the Samsung Audio Lab established last year in Santa Clarita, an hour outside Los Angeles, and we are told that "most of the people based in the Sound Lab... previously worked there" [at Harman].
Devantier's LinkedIn page includes a call for "leaders in the audio field" to join them. Looks like there'll be no shortage now, as with the new deal Samsung gains access to 8000 software designers and engineers to address “the next generation of cloud-based consumer and enterprise experiences, as well as end-to-end services for the automotive market through the convergence of design, data and devices”.
It seems to be that automotive market which has prompted Samsung’s move. Samsung’s Automotive Electronics Business Team, which was established in December of 2015 to identify opportunities for Samsung in the automotive sector, “will work closely with the HARMAN management team to realize the full growth potential of the combination”.
“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,” says Oh-Hyun Kwon, Vice Chairman and Chief Executive Officer of Samsung Electronics.
Samsung also points to “HARMAN’s leadership in new connected car technologies, including its top positions in infotainment, cyber security, over-the-air updates and telematics”, noting Samsung’s existing expertise in connectivity technologies including 5G, UX/UI, display technology and security solutions.
Harman International also licenses Bowers & Wilkins and Bang & Olufsen brands for automotive, last year buying Bang & Olufsen Automotive’s car audio business, whose branded audio products are available in Audi, Aston Martin, BMW and Mercedes-Benz car models. Only last month, a deal was announced to feature B&O Play systems in Ford vehicles from 2017.
The purchase price represents a premium of 28% based on Harman’s closing stock price on November 11 and a 37% premium to Marman’s’s 30-calendar day volume weighted average price ending the same day. 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.
Assuming the deal goes through, Harman will operate as a standalone Samsung subsidiary, still led by current Harman Chairman, President and CEO, Dinesh Paliwal and HARMAN’s current management team. “Samsung is pursuing a long-term growth strategy in automotive electronics,” says the release from Samsung and Hamran, “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.”
We have asked for comments from the Australian distributors of key Harman audio brands.
Convoy International confirms that "for consumers and retailers it is business as usual for JBL Studio Monitors and Synthesis products with Convoy supporting both with sales and after sales service".
Advance Audio Australia has similarly provided a message for its customers: "Current and future owners of Mark Levinson, Revel and Lexicon equipment will continue to receive the high level of Australin support provided by Advance Audio. All three brands have released some fantastic lines of products just this year of a quality and performance you'd expect from these brands, and we look forward to working with them well into the future."