Harman International Industries Inc. (HAR), a developer of audio products and electronic systems, announced that it has acquired Electronica Selenium S/A, a Brazilian company. Electronica is a leading manufacturer and seller of loudspeakers in Latin America.
 
The transaction includes the transfer of all Selenium’s assets and trademarks to Harman. The merger is expected to expand Harman’s presence in Latin America, particularly in Brazil. Following the announcement, Harman’s price rose 3.86% and closed at $34.13.
 
The acquisition will provide Harman greater exposure in both professional and consumer businesses and additional distribution channels to serve the Latin America markets. Eletronica Selenium’s market channels include a network of more than 30 distributors across Brazil and two distribution and logistics centers in the U.S.
 
Electronica Selenium expects annual sales of approximately $60.0 million for the current calendar year and employs approximately 450 people at its combined 250,000 sq. ft. manufacturing facility in northern and southern Brazil . The company also has sales offices serving the U.S. and Europe.
 
Electronica Selenium has an attractive product portfolio. The Professional Audio Line of Electronica Selenium has a wide array of more than 170 products. The company is one of the largest professional audio manufacturers in Latin America with presence in more than 80 countries and 10,000 retail customers worldwide. Selenium owns over 46 patents in design and technology for better sound reproduction.
 
We believe Selenium’s strong presence in Latin American markets and its robust product pipeline will facilitate Harman to penetrate this growing market. Moreover, upcoming FIFA World Cup in 2014 and Olympic Games 2016 in Rio de Janeiro will drive top-line growth in the long term. Moreover, the acquisition of Electronica will bring positive synergies for Harman and help it diversify its business.
 
Harman has a strong global presence with operations in Asia, Europe and Americas and reported net sales of $2.5 billion for the nine months ended March 31, 2010. However, Harman’s overexposure to the automotive industry remains a concern.
 
Harman International faces tough competition from Bose Corp., Boston Acoustics Inc., Pioneer Corp., Yamaha Corp., Rockford Corp. (ROFO), Panasonic Corp. (PC) and Sony Corp. (SNE).
 
We have a Neutral recommendation on Harman.
 
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