May 05, 2024

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[THE INVESTOR] Samsung Electronics' planned acquisition of Harman International appears to have been hit by uncertainties before a shareholders’ vote in the coming months.

Following a class action suit filed by some Harman investors last week, a special counsel team on Jan. 16 sought an arrest warrant for Samsung Electronics Vice Chairman Lee Jae-yong on bribery charges in its ongoing probe into the influence-peddling scandal involving President Park Geun-hye. 

“The Harman deal is Lee’s pet project in his big push on automotive parts business. It remains to be seen whether the deal will get the final approval from shareholders,” an industry source said on condition of anonymity.

“Considering Samsung and Harman have already secured approval from major investors, the class action suit will have a limited impact on the upcoming vote.”

On Jan. 13, a group of Harman investors filed a suit against the company’s CEO and board, saying the US$8 billion buying price was “unfairly cheap.”

The deal, announced in November, is Samsung’s largest-ever purchase seeking business synergies with Harman, the US audio giant that supplies its high-end infotainment systems to a slew of global carmakers. The two companies are especially pinning high hopes on a partnership on connected car solutions, key technology for the ultimate era of autonomous driving. 

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Samsung purchased Harman shares for US$112 apiece, about 28 percent higher than the company’s market capitalization based on share price at the time.

Earlier US hedge fund Atlantic Investment Management, which owns a 2.3 percent stake in Harman, also said it would vote against the deal as the buying price was too low.

“Harman CEO Dinesh Paliwal has recently met top investors and they were allegedly happy with an almost 30 percent premium,” said another source close to the matter. “The deal is highly likely to be approved at a shareholders meeting within the first quarter of this year.”

After the vote, Samsung plans to start the integration work. Like previous cases, all the management members of Harman are expected to remain even after the acquisition. About 8,000 software designers and engineers are working currently at the firm.

By Lee Ji-yoon (jylee@heraldcorp.com)