By Maarten van Tartwijk
AMSTERDAM--Koninklijke Philips NV plans to sell a majority stake
in its lighting components and automotive-lighting activities to an
investment consortium in a cash deal that values the business at
about $3.3 billion.
The sale marks the first step in a two-part plan by the Dutch
electronics group to exit the lighting business to focus on medical
equipment and consumer-lifestyle products.
The plan echoes the decision by Siemens AG, the German
engineering group, which in 2013 listed Osram Licht AG, its
lighting business, having previously separated it from the main
group. Philips Lighting and Osram compete with the lighting
division of General Electric Co.
Go Scale Capital, a fund led by venture-capital firms GSR
Ventures and Oak Investment Partners, plans to acquire an 80.1%
stake in the combined Philips business, with Philips retaining the
remaining stake. Philips pockets around $2.8 billion in cash which
will partly be used to repay debt, a Philips spokesman said.
Philips said earlier this month it also plans to spin off the
bulk of its lighting business, which supplies light-emitting diode
lamps and lighting systems, through an initial public offering next
year. Once that happens, the group would have two main businesses,
one supplying health-care equipment, such as hospital scanners, and
the other, consumer gadgets such as coffee machines and
shavers.
Philips had decided to sell the lumileds, as LED components are
known, and automotive business separately because it was no longer
deemed a strategic fit with the rest of the lighting operations.
Management is trying to shift them toward services, such as
supplying lighting systems for cities and sporting venues, from
manufacturing.
The business Go Scale Capital is taking over makes LED chips
used in televisions and smartphones as well as traffic lights and
lights for cars. It reported $2 billion in sales in 2014, or nearly
a third of Philips' total lighting revenue of EUR6.87 billion.
Philips's decision to jettison its lighting activities follows
several years of stagnating sales even though demand for LED lamps
is rising as countries phase out less energy-efficient incandescent
light bulbs. Competition has proved fierce in the sector while the
longer lifespan of LED lamps has changed the industry's
dynamics.
Sonny Wu, co-founder of GSR Ventures and chairman of GO Scale
Capital, said the lumileds and automotive lighting business still
offers "significant growth and unparalleled inroads into new
opportunities such as electric vehicles."
Mr. Wu's venture-capital firm primarily invests in technology
startups in China, with a focus on semiconductor companies,
wireless firms and green technology. The Go Scale Capital fund
recently invested in Boston Power Inc., a U.S...based manufacturer
of batteries for electric vehicles.
Analysts said Philips fetched a good price for the business,
which could bode well for the IPO of the entire lighting arm next
year.
"The deal illustrates that Philips can maximize value while
still securing a robust future for its divested lighting
activities," said Robin van den Broek of ING, a Dutch bank.
Philips shareholders will vote on the proposed separation of the
remaining lighting activities at their annual meeting slated for
May 7.
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