Philips to sell Lumileds majority share for $1.5bn

Dutch electronics giant Philips announced Monday the sale of a majority share in its Lumileds LED lighting business for $1.5 billion, after cancelling the spinoff earlier this year over US regulatory concerns.

"Royal Philips today announced that it has signed an agreement to sell an 80.1-percent interest in Lumileds to certain funds managed by affiliates of (US-based) Apollo Global Management," the Amsterdam-based company said in a statement.

Philips said it expected the deal to net the firm approximately $1.5 billion (1.41 billion euros) in cash as well as equity, adding Lumileds is valued at around $2.0 billion.

The new move comes after Philips dropped a planned $2.8-billion sale to Beijing-based GO Scale in January when neither company could convince the US Committee on Foreign Investment (CFIUS) to clear the deal.

"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 Philips chief executive Frans van Houten.

- 'Best deal' -

Describing the loss of the earlier GO Scale deal as a "setback", Van Houten told reporters: "We are confident that this time we will succeed."

But Van Houten admitted that "given the backdrop of the CFIUS outcome we had to look for a buyer in a considerably smaller landscape of potential buyers."

"Therefore the premium of the previous process could not be replicated this time," he told reporters.

The transaction is expected to be completed in the first half of 2017, subject to regulatory approvals.

Van Houten however stressed that with retaining a 19.9 minority stake, Philips also had access to so-called preferred equity shares, meaning the Dutch company will receive an additional income "if Lumileds performs well".

Jos Versteeg, an analyst at the Amsterdam-based Theodoor Gilissen private bank told AFP that "Mr Van Houten is a very good deal-maker and he made the best deal under the circumstances."

"It's always very difficult to make a deal when your best partner has to quit because he's not allowed to sell," Versteeg said.

So "at first glance it may seem disappointing, but there is a good part to it as well... if Apollo manages to squeeze some profit out of Lumileds" the price for Philips' 19.9 percent retaining share will be higher, he said.

Durk Veenstra, market commentator with the private RTLZ economics news channel, said "the price that's being paid for now by Apollo is (almost) half of what the Chinese were prepared to pay."

"In short, it hurts (Philips) from all sides," he said.

Philips in 2014 announced it would split in two, separating its healthcare-lifestyle arm from its historic lighting section in a move to streamline operations.

Lumileds, which makes LED and car lighting components has operations in more than 30 countries and employs at least 8,800 workers worldwide, including at its research and development and production facilities in California's Silicon Valley.

Last year it clocked sales of around $2.0 billion.

Philips, which sold its first light bulb a few years after it was founded in 1891, has for the past dozen years focused on medical equipment, which now accounts for more than 40 percent of sales.

Founded in the southern Dutch city of Eindhoven, Philips' healthcare arm employs some 70,000 people in 100 countries.

New York-based Apollo is a major global alternative investment manager with assets under management of approximately $189 billion in private equity, credit and real estate funds.

"We look forward to partnering with Philips... and Lumileds, and bringing in Apollo's resources to support the continued growth and innovation of this industry-leading business," Robert Seminara, senior partner at Apollo, said.