Can Atlantic Investment Management Stop Harman’s Sale to Samsung?



Atlantic owns a 2.3% stake in Harman

Hedge fund Atlantic Investment Management is disappointed that Harman International Industries (HAR) agreed to be sold to Samsung (SSNLF) for $8 billion, or $112 per share. Atlantic Investment Management owned a 2.3% stake in HAR at the end of 3Q16, according to the Wall Street Journal.

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The offer could undervalue HAR

Atlantic Investment Management has balked at the deal to sell Harman International Industries (HAR) to Samsung for $112 per share because it claims the company is worth much more than Samsung’s offer. HAR rose to more than $145 in April 2015, and Atlantic Investment Management’s founder, Alexander Roepers, says the stock has the potential to rise to ~$200 if Harman International Industries completes its growth plan that its management announced in August 2016.

The agreement that Harman International Industries entered with Samsung doesn’t allow it to accept a rival bid. However, Roepers argues that the arrangement is suspect. Harman International Industries’s technology could interest Alphabet (GOOGL), Apple (AAPL), Tesla (TSLA), Qualcomm (QCOM), and other Silicon Valley companies developing automotive technologies.

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Shareholder value maximized

In defense of the deal, Harman International Industries (HAR) says selling itself for $8 billion would immediately unlock significant benefits for shareholders. HAR’s CEO, Dinesh Paliwal, said at the time of announcing the deal with Samsung that the company couldn’t stand still in the face of a rapidly changing industry and increasing competition. Paliwal’s reasoning seems to be that if the board had waited longer perhaps, Harman International Industries would be worth less as time passed.

But Atlantic has vowed to oppose the deal when the matter is put to shareholder voting. While the agreement that prohibits Harman from seeking rival bids makes it tough for Atlantic to stop the sale of Harman to Samsung, it could pressure Samsung to sweeten its offer.

Access to coveted auto technology

The acquisition of Harman International Industries (HAR) could give Samsung access to automotive technology that could strengthen its campaign for connected-vehicle revenue. Samsung is looking for new growth outside its smartphone offerings.


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