Samsung is joining the race toward cars of the future, agreeing to acquire U.S. automotive technology company Harman International Industries for $8 billion, its largest-ever deal.
The market for automotive electronics is expected to grow to more than $100 billion by 2025. Harman is already a major supplier, with more than 30 million vehicles currently equipped with its systems for navigation, onboard entertainment and connectivity.
Samsung said Monday it will pay $112 a share for Harman, representing a 28% premium to the closing price on Friday.
“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,” Oh-Hyun Kwon, chief executive of Samsung Electronics, said in a news release.
“The vehicle of tomorrow will be transformed by smart technology and connectivity in the same way that simple feature phones have become sophisticated smart devices over the past decade,” added Young Sohn, president of Samsung Electronics.
The Korean electronics giant has generally chosen to develop its own technologies in-house rather than make big acquisitions. Its previous record was a two-part, $840 million purchase of AST Research in the mid-1990s.
By acquiring Harman, The Wall Street Journal said, Samsung instantly becomes “a major player” in automotive technology, joining such companies as Qualcomm, which last month agreed to pay $39 billion for NXP Semiconductors, the world’s largest developer of chips for automobiles.
Harman is best known for making car audio systems under brand names such as Harman/Kardon and JBL. It has projected an order backlog of $24 billion, more than three times annual revenue, and about two-thirds of its current sales come from automakers.
“This [deal] is absolutely about the connected car,” Jack Wetherill, senior market analyst at Futuresource Consulting, told USA Today. “Harman are major players in this business and Samsung are not. They know they need to get into it to leverage their IoT [Internet of Things], their smart home and smartphone businesses to effectively spread, develop and maximize their revenues and potential.”