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US$8B Samsung Harman Deal Challenged By Major Share Holder

The $8 Billion Samsung take over of Harman International has hit a stumbling block with a major shareholder arguing the US Company is worth far more.

Atlantic Investment Management, which had a 2.3% stake in Harman as of the end of September, plans to vote against the deal claims CEO, Alexander Roepers.

He claims that the timing is wrong for the deal and that the board mislead shareholders by claiming that they were not looking for potential bidders for the Company that has become a key supplier to several big automotive companies, they are also a global supplier of sound gear.

The deal, Samsung’s largest ever, would help the South Korean electronics giant branch out beyond smartphones by giving it a foothold in the growing business of developing technology for so-called connected cars. The US$112-per-share price was a 28% premium to where Harman’s stock was trading at the time.

Investors are confident the deal will close or betting that Harman could attract a higher bid. That could make it tough for Mr. Roepers or anyone else to stop it.

“The transaction with Samsung was carefully considered and unanimously approved by Harman’s board of directors as the best way to maximize value for all of our shareholders,” the company said in a statement, citing increasing competition.
The Wall Street Journal said that after investing in the company occasionally in the past, Roepers purchased Harman shares earlier this year when they dropped to the $70-range on the theory that concerns about a slowdown in car sales and in China’s economy were unjustifiably weighing on the company. He sold some stock heading into the third quarter, according to a regulatory filing.

When announcing the deal last month, Harman Chief Executive Dinesh Paliwal said the price would deliver “significant and immediate” value for Harman shareholders and allow the company to grow inside Samsung.

“We cannot stand still,” Mr. Paliwal said at the time. “Based on the pace of change in the industry, we need to continue moving quickly to remain the industry leader.”

At least one other bidder has expressed interest in buying Harman. In a regulatory filing this week, Harman disclosed it had received an all-stock offer from an unnamed company in December 2015 that, at the time, was worth $115 a share. The stock prices of both companies fell afterward, according to the filing, and they mutually agreed to end the discussions.
Harman’s bankers were in touch with the undisclosed bidder when Samsung surfaced in September, but Harman ultimately decided the all-stock offer wasn’t likely to top Samsung’s bid, the filing said. Harman’s board agreed not to seek other bidders, a condition Samsung sought.

Mr. Roepers said he was “dismayed” that Harman didn’t attempt to find another bidder after Samsung arrived.

While some analysts have speculated another bidder could surface, others have said Harman’s outlook is comparable to that of its peers.

“We think it would be difficult for shareholders to argue for a substantial premium to the peer group,” Piper Jaffray wrote last month. “We think the offer is fair.”

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