By Lee Min-hyung
Some Harman International shareholders have filed a class suit against its high-profile takeover by Samsung Electronics, calling the $8 billion (9.41 trillion won) all-cash transaction "flawed and undervalued."
Last week, a group of shareholders from the U.S.-based auto-parts maker filed the fiduciary duty lawsuit in Delaware Chancery Court against Harman International CEO Dinesh Paliwal and the firm's board members. They are expected to exercise their right to vote against the deal, putting the brakes on Samsung's plan to finalize the matter no later than November.
They also objected to the terms and conditions of the contract, calling the agreement between the two firms inadequate. They cited Harman's agreement to a $240 million termination fee and its decision not to accept potential bidders other than the Seoul-based firm.
"These provisions, particularly when considered collectively with the board's inherent conflicts, substantially and improperly limit the board's ability to act with respect to investigation and pursuing superior proposals and alternatives, including a sale of all or part of Harman," Robert Fine, who leads the shareholders, was quoted as saying in U.S. media.
This is not the first time Harman investors have opposed the acquisition, with Atlantic Investment Management opposing the deal last December.
Then, the equity investment firm based in Manhattan — holding a 2.3 percent stake in Harman — said it would vote against the deal, citing similar reasons as the latest lawsuit by shareholders. The company claimed the $112-per-share offer by Samsung is a clear devaluation of Harman. Atlantic Investment Management founder Alexander Roepers said Harman's stock will reach $200 in consideration of its high above $145 in April 2015 and its growth potential.
In November, Samsung announced the acquisition , offering $112 a share for Harman, which was a 28 percent premium to the latter's Nov. 11 closing price in New York.
The move came as Samsung Electronics aims to expand in the global auto parts industry as part of group-wide efforts to find its next growth area.
Following the announcement, the Harman CEO underlined at a press conference in November that the transaction would allow the company to establish a stronger automotive portfolio by taking advantage of Samsung's expertise in areas such as sensors, displays and fifth-generation (5G) connectivity and mobility.
Samsung Electronics officials declined to comment on the lawsuit, only saying that it will push for finalizing the deal as planned.
Harman International is expected to hold a shareholders' meeting in the first quarter of this year to decide whether to approve the transaction with Samsung.