Samsung Electronics Co. agreed to buy U.S. auto-related supplier Harman International Industries, Inc. (NYSE:HAR) in an all-cash deal worth $8 billion, signaling its ambition to enter the world’s automotive technology industry. Under the deal, the South Korean smartphone maker will pay $112 for each of Harman’s share in cash. It represents a premium of 28 percent to Harman’s closing price on Friday. Harman shares rose as much as 25 percent to $109.68 in the early trading in New York.
“Harman perfectly complements Samsung in terms of technologies, products and solutions, and joining forces is a natural extension of the automotive strategy we have been pursuing for some time,” said Samsung CEO Oh-Hyun Kwon in a press release. “[This acquisition] immediately establishes a strong foundation for Samsung to grow our automotive platform.”
Harman’s Chief Executive Dinesh Paliwal leaded the company to pushed aggressively into the automotive technology industry in recent years. The company used to sell audio products. But now auto-related products account for two-thirds of its current sales. Samsung are trying to push into the automotive world in recent years. It launched its automotive electronics business team a year ago and invested in Chinese automaker BYD Co Ltd. This year. The Harman deal will be its biggest acquisition ever.
Samsung want to change consumers’ behavior by combining the auto and mobile industries. But it faces intense competition from Apple Inc. and Alphabet Inc., who are working on self-driving cars. “Samsung is using its huge cash pile to pull ahead of rivals in the auto technology market. But it remains to be seen whether Samsung will be able to grow into a company that will be able to compete with the likes of Bosch and Continental,” said fund manager Park Jung-hoon of HDC Asset Management, which owns Samsung Electronics shares.