Philips to sell majority stake in lighting components division for $2.8 bn

31 Mar 2015

Philips today agreed to sell a majority stake in its lighting components division to private equity investors for $2.8 billion as part of its plan to focus on the consumer health-care market.

The Amsterdam-based company will sell an 80.1 per cent stake to GO Scale Capital, an investment fund run by private equity groups GSR Ventures and Oak Investment Partners, and retain a 19.9 per cent stake.

The electrical appliance group had in September last year said it planned to merge its Lumileds LED components and automotive lighting divisions into a standalone subsidiary which could potentially be spun off. (See: Philips to split company in two)

Philips, the world's largest lighting products maker, has been seeking third-party investors for its lighting business for which Bain Capital, CVC, CD&R, KKR & Co and Onex had tabled bids, according to several media reports.

Philips has been a household name for around a century but in recent years it had stripped down its business to focus on lighting and medical technologies where margins were strong and competition from emerging markets limited.

The company had in 2013 announced the sale of its lifestyle entertainment segment, which makes stereos and DVD players, after it sold its troubled TV-making arm in 2012.

Philips Lighting spans the entire lighting value chain – from light sources, luminaires, electronics and controls to full applications and solutions – through Light Sources & Electronics, Consumer Luminaires, Professional Lighting Solutions, Automotive Lighting, and Lumileds.

Lumileds, which sells lighting components to the general illumination, automotive and consumer electronics markets, generated sales of about $2 billion last year.

Philips chief executive Frans van Houten, a veteran known for his turnaround prowess, last year pledged to extend his efficiency drive to bolster profitability.

The CEO is looking to achieve 2016 goals including a compound annual growth rate for comparable sales of 4 per cent to 6 per cent, with a profit margin of 11 per cent to 12 per cent.

Commenting on the sale, Houten, said, ''We have significantly improved the performance of the LED components business and optimised the industrial footprint in the automotive lighting business over the past few years, and established a strong management team and innovation pipeline.''