Samsung Electronics (NASDAQOTH: SSNLF) has recently been looking for ways to become a major player in the auto business. It appears to have found one.

The South Korean electronics giant said on Monday that it has agreed to acquire Harman International Industries (NYSE:HAR), a leader in connected-car and automotive "infotainment" technology, for $8 billion in cash. 

Who is Harman International?

Harman owns several audio brands that produce products for consumers, professionals, and automotive applications, including JBL, Lexicon, Mark Levinson, and Harman Kardon, among others. 

This Jaguar's XF's in-dash infotainment system was supplied by Harman. Image source: Jaguar Land Rover. 

In recent years, Harman has developed deep expertise in "connected car" technology, building on its established presence in the market for in-car audio systems. It now develops "embedded infotainment solutions" -- units that combine navigation, multimedia support, and wireless connectivity, to be installed as original equipment by automakers. 

Harman's automotive "partners" include some big names: Mercedes-Benz parent Daimler, Volkswagen, BMW, Tata Motors' (NYSE:TTM) Jaguar Land Rover unit, and Fiat Chrysler Automobiles (NYSE:FCAU)

According to Harman, about 65% of its sales are auto-related. 

Why does Samsung want to buy Harman?

Like its consumer-electronics rivals, Samsung sees which way the industry's winds are blowing: The automobile is rapidly becoming the latest connected "device."

Between self-driving technology, advanced connectivity, vehicle-to-vehicle communications, and electrified drivetrains, a lot of the innovation that started with smartphones is finding its way into cars. That trend is widely expected to accelerate in coming years. 

Samsung is a huge player in consumer electronics, but it hasn't had a significant presence in autos. But it has clearly been watching its Korean rival, LG Chem (NASDAQOTH: LGCLF) build the foundations of a major business supplying batteries and components for electric cars, including General Motors' new all-electric Chevrolet Bolt EV. Samsung clearly wants a piece of that action for itself. 

There have been several signs in recent months that it was seeking one: Its battery unit said in August that it will build a $358 million factory in Hungary to make battery cells for electric cars, and reports last summer suggested that it had conversations with FCA about buying the Italian-American automaker's Magneti Marelli components unit

What company executives said about the deal

Harman CEO Dinesh Paliwal said the deal is good for shareholders and employees, and that the combined company will have the scale to be a significant player in autos. 

This compelling all-cash transaction will deliver significant and immediate value to our shareholders and provide new opportunities for our employees as part of a larger, more diversified company. Today's announcement is a testament to what we have achieved and the value that we have created for shareholders. Samsung is an ideal partner for Harman and this transaction will provide tremendous benefits to our automotive customers and consumers around the world. Combining Samsung's strengths in leading-edge displays, connectivity and processing solutions with Harman's technology leadership and long-standing customer relationships will enable OEMs to provide new offerings for their customers. Partnerships and scale are essential to winning over the long term in automotive as demand for robust connected car and autonomous driving solutions increases at a rapid pace. This transaction will bring Harman and Samsung's complementary strengths together to accelerate innovation in this space. More broadly, this investment underscores the strength of Harman's employees, as well as our success and leadership across our markets. We look forward to working together with Samsung to elevate experiences for consumers worldwide.

Harman's facility in Novi, Michigan is close to many automakers' engineering centers. Image source: Harman International Industries. 

Samsung Electronics CEO Oh-Hyun Kwon said Harman is a "strong foundation" for Samsung's automotive strategy. 

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. As a Tier 1 automotive supplier with deep customer relationships, strong brands, leading technology and a recognized portfolio of best-in-class products, Harman immediately establishes a strong foundation for Samsung to grow our automotive platform. Dinesh Paliwal is a proven global leader and, in our extensive discussions, we have developed deep respect for him, his strong senior leadership team and Harman's talented employees. Harman's sustained track record of rapid growth fueled by technology leadership and an unmatched automotive order pipeline reflects its commitment to innovation and customers.

What's next for Samsung and Harman?

The deal awaits approval by Harman's shareholders. On the surface, it doesn't look likely to draw much opposition: The purchase price represents a 28% premium over Harman's share price at Friday's close. 

If all goes well, the parties expect the deal to close in mid-2017.

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