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In what is South Korea's biggest overseas deal, Samsung to buy car tech firm Harman for $8 billion

In what is South Korea's biggest overseas deal, Samsung to buy car tech firm Harman for $8 billion
Samsung Electronics announced its biggest move till date into the auto electronics market and the biggest overseas acquisition ever by a South Korean firm when it announced that it would be buying Harman International Industries in an $8 billion deal.
As the company tries to break into the high-barrier automotive industry where it has little track record, v even as the electronics giant has previously shunned big acquisitions.
"An M&A deal this big is a first for us. But it shows that under Jay Y. Lee, the company is changing and open to new ways to grow," a source familiar with the reportedly deal told Reuters, referring to Samsung Electronics' vice chairman.
Samsung's efforts to find new areas of growth as its mainstay smartphone business - scarred by the disastrous withdrawal of the fire-prone Galaxy Note 7 – slows is the purchase of the Stamford, Connecticut-based maker of connected car and audio systems.
Creating an opening for tech companies to break into a market for software, services and components, automakers already include or are developing technologies to enhance safety and provide better smartphone connectivity and entertainment systems.
Samsung agreed to acquire Harman for $112.00 per share in cash, a 28 percent premium to the U.S. firm's closing price on Friday.
"Samsung is using its huge cash pile to pull ahead of rivals in the auto technology market. But it remains to be seen whether Harman will be able to grow into a company that will be able to compete with the likes of Bosch and Continental," said HDC Asset Management fund manager Park Jung-hoon.
According to its website, Harman's products, are used in more than 30 million vehicles made by automakers such as BMW, Toyota Motor Corp and Volkswagen and these products provide infotainment, telematics, connected safety and security services.
Harman’s automotive order backlog as of end-June stood at $24 billion, more than three times annual sales of $6.9 billion in fiscal year 2016 and it is the maker of JBL audio system, earns around two thirds of its revenue from the automotive-related segment.
To identify growth in opportunities in the automotive electronics sector, Samsung created an automotive electronics business team a year ago. This year it invested $450 million in Chinese automaker and rechargeable batteries firm BYD Co Ltd.
Sources have recently said that over a potential sale or partnership for Fiat Chrysler’s Magneti Marelli auto parts maker, Samsung has held talks with the company. The current status of those talks is unclear.
The Harman acquisition is expected to close in mid-2017 and is subject to regulatory approvals.
A day earlier, there were reports that Lee and several other heads of South Korea's family-owned conglomerates were questioned by prosecutors investigating a political scandal engulfing South Korean President Park Geun-hye and the deal was announced a day after such media reports.

Christopher J. Mitchell

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