Samsung to Buy Harman International in an $8 Billion Bet on Cars

Samsung to Buy Harman International in an $8 Billion Bet on Cars

HONG KONG — Samsung Electronics is spending $8 billion to get inside your car.

Samsung, the South Korean electronics giant — which already makes popular but recently problem-plagued smartphones — said on Monday that it had agreed to buy Harman International Industries, an American automotive technology company, in an ambitious push into a whole different kind of mobile.

Harman is best known for making car audio systems under brand names popular with audiophiles such as Harman/Kardon and JBL. But Harman’s appeal to Samsung comes from what it calls its connected car business — an operation that supplies a car’s navigation services, its onboard entertainment systems and its connectivity to the rest of the world.

“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,” Young Sohn, the president and chief strategy officer of Samsung Electronics, said in a news release.

The deal marks the latest ambitious foray by an established name in the technology world into a new generation of smart objects sometimes collectively called the internet of things. Under this vision, everything from home security systems to refrigerators will be connected to the internet, gathering data and controllable at the touch of a smartphone icon.

Much of that focus has come down to cars. Last month, the American chip maker Qualcomm agreed to acquire NXP Semiconductors for $38.5 billion, which would give it a presence in the market for making a new generation of chips for smart cars.

With cars likely to get more screens and more computers, the purchase gives Samsung a stake in what could be an industrywide boom. It also could provide insight for the company’s varied components businesses. Samsung can learn firsthand from Harman what it needs to do to sell its screens, chips and memory to carmakers.

Other major technology names are also betting on mobile and smart gadgets. In July, SoftBank of Japan struck a deal to acquire ARM Holdings, a British chip designer with a focus on mobile devices, for $32 billion. Last year, Avago Technologies bought Broadcom, which provides chips for the Apple iPhone, for $37 billion.

It is far from certain whether those technologies will end up being the ones that power the smart gadgets of tomorrow. Apple and Google have expressed interest in developing cars, while traditional automotive suppliers have also looked to move up the value chain.

Samsung’s $112-a-share offer for Harman represents a 28 percent premium from where its shares traded on Friday, but that is still well below the roughly $145 that each Harman share was fetching early last year. Harman’s results from its professional solutions business — which makes sound and lighting for concerts and other events — have weakened. The company has said it will work to bring the operations back to their previous strength.

Samsung has largely benefited from the new mobile world, as growing demand for smartphones bolstered sales of its displays and microchips. But the company has faced difficulties selling its own branded phones, including a drop in market share, as Apple captured more of the high end and a new generation of low-cost Chinese manufacturers increased pressure on the bottom.

The company regained some ground with the Galaxy 7 line of curved phones. But last month, in an embarrassing turnabout, it discontinued its new, premium Galaxy Note 7 after several caught fire. The stumble wiped $2 billion off its profit and cast a shadow over the Samsung brand name.

The deal for Harman is a rare one for Samsung, which keeps tight control of its supply chain — often owning its suppliers outright — and has mostly eschewed big deals to fill in holes in its portfolio.

Samsung said that it would also have access to Harman’s designers and engineers, which would allow for more collaboration. It did not give details on what sorts of services they would aim to build together.

It said that Dinesh Paliwal, Harman’s chairman and chief executive, would continue to run the operation, and that it would keep the company’s facilities.

The deal is expected to close in mid-2017. Samsung was advised by Evercore, with Paul Hastings as legal counsel. JPMorgan and Lazard advised Harman, with Wachtell, Lipton, Rosen & Katz as legal counsel.

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