Samsung in $8bn move into connected cars

Alan Burkitt-Gray
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Korea firm makes second move into connected cars with $8bn purchase of audio and electronics group Harman

Samsung is buying US automotive electronics company Harman for $8 billion, in the biggest ever international deal by a South Korean company.

The move is seen as a strategic departure by Samsung, which has traditionally kept away from M&A deals as a way of expanding its business.

Harman specialises in connected car systems, with about 65% of its annual sales in this area. Samsung says that more than 30 million vehicles have its connected car and audio systems, including embedded infotainment, telematics, connected safety and security. Its customers include BMW, Toyota and Volkswagen.

“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 Oh-Hyun Kwon, vice chairman and CEO of Samsung Electronics.

Dinesh Paliwal, chairman, president and CEO of Harman, said: “This compelling all-cash transaction will deliver significant and immediate value to our shareholders and provide new opportunities for our employees as part of a larger, more diversified company. Today’s announcement is a testament to what we have achieved and the value that we have created for shareholders.”

Young Sohn, president and chief strategy officer of Samsung Electronics, commented: “Working together, we are confident that Harman can become a new kind of tier-one provider to the OEMs by delivering end-to-end solutions across the connected ecosystem.”

Samsung said that it was attracted by Harman’s audio technologies, as well as by its expertise in infotainment, cyber security, over-the-air updates and telematics.

The Korean company said it would “gain access to Harman’s 8,000 software designers and engineers who are unlocking the potential of the [internet-of-things] market. This collaboration will deliver 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.”

Kwon said: “As a tier-one 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.

Harman will retain its existing management, said Samsung. The company’s annual sales in the year ending September 2016 were $7 billion, only a $1 billion less than Samsung’s agreed purchase price.

This is Samsung’s second purchase in the field since it set up an automotive electronics team a year ago. It has bought a Chinese company, BYD, and Reuters says it is talking to Fiat Chrysler abut buying its Magneti Marelli business.