Philips offloads LED lighting components unit for USD2.8bn
The deal, which herald a bigger strategic move for Philips that will see the company spin off its main lighting division, via a stock market flotation, with the Dutch group opting to focus more on medical technology and selected consumer electronics in future.
The deal is expected to be completed in the third quarter of 2015 subject to regulatory approval. The newly formed company will be called Lumileds and will continue to act as a supplier to Philips.
Philips, which is the world’s largest lighting manufacturer, estimates that the value the sale of the lighting components subsidiary represent $3.3 billion including debt. The lighting components division comprises an automotive lighting unit and the Lumileds LED manufacturing business. The unit made a 2014 profit of 141 million euros on sales of 1.42 billion euros.
Go Scale Capital, is funded by GSR Ventures and Oak Investment Partners, has made other investments in LEDs and electric car battery technology says it plans to invest in and expand the business of using LEDs in cars. Go Scale’s past investments include Boston Power, a U.S.-based manufacturer of electric vehicle batteries, and Xin Da Yang, a Eco-EV company in China.
Go Scale has offices in Hong Kong, Beijing and Silicon Valley in the USA and is an investment fund for by GSR Ventures and Oak Investment Partners. Other members are venture capital funds Asia Pacific Resource Development, Nanchang Industrial Group and GSR Capital.
"There were other bidders, also good bidders, perhaps with fewer connections in the industry of semiconductors and the ability to help in building out scale," Philips CEO Frans van Houten told reporters.
Last week it was beleived that rival bidding groups led by private equity firms CVC-KKR and Bain Capital had been close to capturing Lumileds but Go Scale entered the bidding in recent weeks.
Philips said it wanted to sell the subsidiary, which will be called Lumileds, because many of its customers compete with Philips.
Approximately 20 percent of component sales are to Philips’ own main lighting business. Philips said the company would remain a customer which was another reason to sell to an investor that wants to keep the business strong and growing.
Go Capital said it could offer Lumileds complementary technologies and manufacturing capacity that would allow it to pursue further growth and scale.
Philips has described the components subsidiary as a stable cash-generator. Philips will retain a 34 percent stake in the U.S.-based LED arm.
Commening on the deal Philips chief executive Frans van Houten said: "We have significantly improved the performance of the LED components business and optimized the industrial footprint in the automotive lighting business over the last few years, and established a strong management team and innovation pipeline. We are therefore convinced that together with GO Scale Capital, Lumileds can grow further, attract more customers and increase scale as a stand-alone company".
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