Why HAR Stock Surged 25% on Monday

HAR StockHarman Stock Gains on This News   

Samsung Electronics (OTCMKTS:SSNLF) announced on Monday that it will acquire Harman International Industries Inc (NYSE:HAR) for an all-cash deal of around $8.0 billion or $112.00 per share.

This deal is important for Samsung to accelerate the growth in its automotive and connected technologies. Harman stock jumped about 25% on the news and ended the trading session at $109.72.

Samsung is likely to gain significant presence in the connected car market with this deal. The acquisition is expected to create an end-to-end solutions powerhouse by combining Harman’s leadership in infotainment, telematics, and sound management with Samsung’s best-in-class connected mobility solutions, user experience, and displays. (Source: “Samsung to Acquire Harman Press Release,” Harman International Industries Inc, November 14, 2016.)

As Samsung’s smartphone problems refuse to go away, it’s important for the company to enter into other big-growth areas. Samsung also makes chips and displays.

Harman had announced its third-quarter results in the first week of November, reporting an eight-percent increase in net sales. HAR stock has been inching upward since then.

In a research report, Baird Equity Research wrote, “Harman was missing, in our opinion, a meaningful presence in displays and cockpit electronics; Samsung has these.” (Source: “Samsung to buy car tech company Harman for $8 billion,” Reuters, November 14, 2016.)

Samsung is betting big on the next big thing in technology, which is smarter cars. On closure of the deal, Samsung will gain a significant presence in the large and rapidly growing market for connected technologies, particularly automotive electronics, which has been a strategic priority for Samsung, and is expected to grow to more than $100.0 billion by 2025.

Harman is the market leader in connected car solutions, with more than 30 million vehicles currently equipped with its connected car and audio systems, including embedded infotainment, telematics, connected safety, and security.

Bottom Line on Harman Stock

Harman’s experience in designing and integrating sophisticated in-vehicle technologies, as well as its long-term relationships with most of the world’s largest automakers, will create significant growth opportunities for the combined business by enabling it to leverage Samsung’s experience in connected mobility, semiconductors, displays, and its global distribution channels.

Samsung’s entry into the auto-electronics market is significant, and is a big strategic shift for the company. Harman complements Samsung’s businesses, and HAR stock is likely to be in the limelight following the news of the deal.