Philips sells domestic appliances business for EUR3.7bn
The domestic appliance business had sales of EUR2.2bn in 2020 in kitchen, coffee, garment care and home care devices as part of total sales of EUR19.2bn for Philips. The license agreement has annual payments that represent an estimated net present value of approximately EUR 700m, resulting in a total deal value of approximately EUR4.4bn. The deal is expected to be completed in the third quarter of 2021 subject to customary closing conditions. Philips and Domestic Appliances will enter into an exclusive brand license agreement to use the Philips brand and certain of Philips’ other domestic appliances brands for manufacturing, sales, and marketing globally for a period of 15 years, which is renewable subject to the terms of the brand license agreement. This will see the Domestic Appliances business presented as a discontinued operation in Philips’ financial statements from the first quarter of 2021, minimising the financial impact of losses from the Covid-19 pandemic. “I am pleased that in Hillhouse Capital we have found a new home for the Domestic Appliances business to further expand on its market leadership, strong brand and pipeline of new innovations,” said Frans van Houten, CEO of Royal Philips. The deal, which started in January 2020, continues the focus for Philips as a medical technology company, after its recent acquisition of medical data management companies, although it has kept the personal health business. “This transaction concludes our major divestments,” said van Houten. “Going forward, our focus is on extending our leadership in health technology and continuing our transformation into a solutions company supporting professional healthcare customers achieve the Quadruple Aim and consumers with their personal health.” This includes the EUR 3.2bn Personal Health businesses as part of the integrated health continuum approach through consumer-driven product and solutions innovation in areas such as oral healthcare, personal care, and mother & child care, says van Houten. “We look forward to joining forces with Philips to expand into new markets and capture more growth opportunities globally,” said Lei Zhang, Founder and CEO of Hillhouse Capital. “We are aligned with Philips’ mission to bring high quality products to support healthy and fulfilling lifestyles for consumers across the globe.” The domestic appliance business has 7000 staff and operates in 100 countries. The headquarters will remain in the Netherlands, says Zhang. “I am convinced that together with Hillhouse Capital’s deep e-commerce, supply chain and digital expertise, we will be in a great position to continue bringing meaningful innovations to the consumer’s homes,” said Henk de Jong, CEO of Philips Domestic Appliances. “Based on our market leading product portfolio, broad customer and consumer base and R&D capabilities, we are keen to keep supporting families and individuals to lead healthier and happier lives. We look forward to working with Hillhouse to capture additional growth opportunities.” Hillhouse is backed by US universities including Yale, Stanford and Princeton and has strong links in China with investments in Tencent and JD.com, but has also invested in an organic baby food and snack manufacturer called Little Freddie, a Californian craft beer maker and a pet food brand. https://www.philips.com
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