A group of Harman’s shareholders is opposing the merger with Samsung and has filed a class action lawsuit against the company’s board of directors and Dinesh Paliwal, the CEO of the Stamford-based firm. The lawsuit was filed last week with the Delaware Chancery Court and alleges that Dinesh and the rest of the company’s board severely undervalued Harman when they agreed to be acquired by Samsung for $8 billion in November. Due to that claim, the plaintiffs are accusing the company’s board of directors of violating their fiduciary duty as they allegedly weren’t acting in the best interest of Harman’s shareholders. Samsung and Harman have yet to comment on this report, but a potential class action lawsuit could potentially jeopardize their merger which has yet to be approved by shareholders and regulators.
Some Harman shareholders have previously voiced their concerns over the deal, also due to the belief that the South Korean tech giant should pay more than $8 billion to acquire the US manufacturer of connected car systems. It has yet to be determined whether this is the same group of people who have now filed a lawsuit against their own board. At the moment, the only known plaintiff is one Robert Pine. Apart from seeking damages, the lawsuit criticizes Harman’s agreement to not consider other offers while Samsung is finalizing the transaction. A portion of the company’s shareholders unrelated to this lawsuit is also reportedly planning to vote against the deal, though it isn’t likely there will be enough votes opposing the merger to stop Samsung from acquiring Harman.
Additionally, some Samsung officials are allegedly worried that the company’s attempt to purchase a controlling stake in Harman could be jeopardized by a recent corruption scandal in South Korea, Yonhap News Agency reports. Samsung is currently being investigated in its home country over allegations that it bribed a confidante of President Park with the goal of facilitating its acquisition of Cheil Industries in 2015. The South Korean tech giant wants to acquire Harman as a part of its push into connected car components market. While the company has recently been streamlining its operations, its leadership believes the automotive electronics industry can be a massive future revenue stream. Due to that conviction, Samsung decided to go through with acquiring Harman despite mostly downsizing its business portfolio in recent months.