Samsung’s acquisition of Harman hits potential roadblock
WORLD: South Korean media recently reported that Harman shareholders have filed a class action suit against the manufacturer’s board and CEO, Dinesh Paliwal, in opposition of the proposed US$8 billion merger with Samsung Electronics. As stated by Korean news outlet Yonhap, the lawsuit was filed in the US state of Delaware with shareholders, led by Robert Pine, claiming that ‘the deal's price fell short of Harman's corporate value’.
The US$8 billion acquisition would be the largest in Samsung’s history and will proceed should more than 50 per cent of Harman's shareholders vote in favour at an upcoming shareholders’ meeting. Samsung agreed a price of US$112 per share, which is reportedly 28 per cent higher than the price listed on 13th November (the day prior to the initial acquisition announcement), and 37 per cent higher than the average share price from the previous month. However, Atlantic Investment Management, an American hedge fund with a 2.3 per cent stake in Harman, stated that it would vote against the acquisition due to a low buying price in December.
Those filing the lawsuit claim that Harman did not seek competing offers from alternative prospective buyers. This could spell a fundamental flaw in the deal, which, if completed would allow Samsung to become a tier-1 component supplier within the automotive industry, which makes up approximately 65 per cent of Harman’s sales.
A definitive proxy statement was later filed by Harman with the United States Securities and Exchange Commission (SEC), inviting shareholders ‘to attend a special meeting of the stockholders of Harman International Industries, Incorporated’ on 17th February. The statement notes that stockholders ‘will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger dated as of November 14, 2016, by and among the Company, Samsung Electronics’. It goes on to recommend that shareholders vote in favour of the acquisition, adding that ‘The board of directors of the Company unanimously approved the merger agreement and determined that the merger and the other transactions contemplated by the merger agreement are advisable and in the best interests of the Company and its stockholders’.
It has since been reported that Harman has withdrawn its financial outlook and ceased conducting earnings conference calls.
‘The pending acquisition of Harman by Samsung will accelerate connected and autonomous driving innovation and technology deployment faster than if Harman were to remain a standalone company,’ stated Mr Paliwal. ‘The transaction also delivers immediate and compelling cash value to our shareholders. We remain on track to close the transaction in mid-2017.’