Philips to sell controlling stake in Lumileds to Apollo Global for $1.5 bn

Dutch electronics group Royal Philips NV yesterday struck a deal to sell a controlling 80.1-per cent stake in its LED components and car lighting business Lumileds, to US-based private equity firm Apollo Global Management, for $1.5 billion in cash.

Philips, based in Amsterdam, said that it will retain the remaining 19.9 per cent interest in Lumileds.

The deal values Lumileds at an enterprise value of approximately $2 billion, including debt and debt-like items.

Philips expects to receive cash proceeds, before tax and transaction-related costs, of approximately $1.5 billion and participating preferred equity.

Post closing, Philips will receive participating preferred equity through which Philips will be entitled to an incremental share of the future value creation, depending on the achievement of certain returns by Apollo.

The transaction is expected to be completed in the first half of 2017, subject to customary closing conditions, including the relevant regulatory approvals.

The sale comes ten months after Philips terminated its proposed $3.3-billion sale of Lumileds to Chinese private equity firm Go Scale Capital, after the Committee on Foreign Investment in the US blocked the deal on national-security grounds. (See: Philips terminates $3.3-bn Lumileds sale to Chinese PE firm on US regulatory concern) Philips had said in June 2014 that it would merge its Lumileds LED components and automotive lighting divisions into a standalone subsidiary, which could potentially be spun off, and later announced that it would sell 80.1-per cent stake while retaining a 19.9-per cent stake for now.

San Jose, California-based Lumileds manufactures high-powered LED lights, while the automotive lighting division sells light sources to car makers and auto parts and repair stores.

Lumileds, which operates in more than 30 countries and employs around 9,000 people worldwide, generated sales of approximately $2 billion in 2015.

''With this transaction, we will be completing an important phase of the transformation of our portfolio and I am satisfied that in the Apollo managed funds we have found the right owner for Lumileds,'' said Frans van Houten, CEO of Royal Philips.

''In line with our strategic focus on health technology, Lumileds has been operating as a standalone company within Philips since early 2015. With Apollo managed funds acquiring a majority interest in Lumileds and partnering with Philips, Lumileds is now well-positioned for further growth and value creation, building on its robust innovation pipeline, technology leadership and strong customer base,'' he added.