The two acquisitions come at a vital time in HARMAN’s growth plan and have wide ranging implications for the automotive industry, as well as mobile, retail, healthcare and other Internet of Things (IoT) verticals, noted Egil Juliussen and Mark Boyadjis of IHS Automotive.

Red Bend. The Red Bend transaction is valued at $170 million, including approximately $99 million in stock and $71 million in cash. The number of HARMAN shares issued will be based on the volume weighted average trading price 60 days prior to January 21. Under the agreement, the selling stockholders of Red Bend are eligible for a cash earn-out of up to $30 million in the first quarter of calendar year 2017 based on the achievement of certain performance milestones.

Red Bend is the leading provider of the most advanced OTA solutions, serving top handset manufacturers and mobile carriers with more than two billion Red Bend-enabled devices in the market globally.

This acquisition of Red Bend, a true pioneer in OTA and virtualization technologies for cyber security, adds a critical component to our automotive systems and services portfolio that will essentially future proof software in cars, ultimately making them safer, smarter and more efficient. Together with our Symphony Teleca acquisition, HARMAN now has the essential foundation and deep bench strength for a comprehensive systems and services portfolio. Today marks a huge transformation for HARMAN and further advancement towards delivering consumers a seamless, connected car and connected lifestyle experience.

—Dinesh C. Paliwal, Chairman, President, and CEO of HARMAN

Red Bend’s software management solutions and hypervisor-based virtualization technologies for cyber security are already widely adopted in mobile devices and are suited to meet the rising demands of the connected car. By 2020, it is expected that more than 90% of vehicles on the road will be connected (Frost and Sullivan).

Red Bend solutions also serve as prerequisites for autonomous driving, HARMAN said. By bringing Red Bend under the HARMAN umbrella and driving broad industry usage, HARMAN’s combined technology portfolio will enable safe, secure OTA updates for a variety of on-board Harman and non-Harman automotive systems—whether embedded or downloaded—speeding the pace of innovation to automakers and the industry.

The Red Bend acquisition is subject to regulatory approvals and customary closing adjustments. It is expected to close in third quarter of HARMAN’s 2015 fiscal year.

Upon close of the transaction, Red Bend will operate within HARMAN as an independent unit led by its existing management team, while benefiting from HARMAN’s scale, resources, and deep automotive domain experience. Red Bend will remain dedicated to serving and growing its target markets, including mobile handset OEMs, service providers, semiconductor vendors and tablet manufacturers, as well as its growing base of automotive OEMs and other Tier 1 suppliers.

Symphony Teleca. Under the agreement, HARMAN will purchase Symphony Teleca for a base purchase price of $780 million. In addition, the selling stockholders are eligible for a cash earn-out based on a calendar 2015 revenue target. Approximately $548 million will be paid at close - $382 million in cash and $166 million in HARMAN stock. The number of HARMAN shares issued will be based on the volume weighted average trading price 60 days prior to January 21. The remainder of the base purchase price as well as any additional earn-outs will be paid in cash in the first quarter of calendar 2016. The cash and stock transaction is expected to be accretive to HARMAN’s adjusted earnings in fiscal year 2016, excluding purchase accounting charges, transaction costs, integration costs and other special items. The transaction is subject to customer closing adjustments.

The Internet of Things (IoT) is ushering in a rapid convergence of experiences, content and commerce and advancing technology from digital to connected to intelligent systems. Software is driving this evolution and as a result, software solutions and services will be key to HARMAN’s continued success. The acquisition of Symphony Teleca is a transformative step for HARMAN that gives us immediate scale in software services. With the addition of cloud, mobility and analytics competencies, we will accelerate solutions for the connected car and for a broader set of industries and markets.

—Dinesh C. Paliwal

Symphony Teleca serves more than 300 active customers, including Google, Microsoft, Intel, Adobe, Jaguar Land Rover, Verizon, Comcast, Sirius XM and Tesco, and spans numerous verticals, such as telecom, automotive, healthcare, consumer electronics, retail and media.

Symphony Teleca is a leading alliance member of Microsoft and Intel IoT platforms, and is the only services company that is a member of the Google Open Automotive Alliance, of which HARMAN is also a member.