Royal Philips NV has signed an agreement with a consortium led by China and U.S.-based GO Scale Capital to sell its majority stake in its light emitting diode (LED) and automotive lighting business.
Under the deal, 80.1% of Philips’ LED and lighting business will be acquired by the consortium—with Philips retaining 19.9% stake in the business—for about $3.3 billion. Following the transaction, a new company will be formed under the name Lumileds and will be led by CEO Pierre-Yves Lesaicherre.
Philips expects to receive cash proceeds of approximately $2.8 billion in the third quarter of this year and a deferred contingent payment of up to $100 million.
Jamie Fox, principal analyst for lighting and LEDs at IHS Technology, says the former Philips lighting division began 2015 in a strong position after gaining market share in 2014. The new Lumileds was one of only two of the top 10 suppliers—along with MLS in China—to record growth of more than 20 percent last year, according to IHS’ LED Intelligence service. In the fourth quarter of last year, Philips managed to overtake Samsung in the rankings to become the third overall LED supplier and was one of only four companies to manage $1 billion in annual packaged-LED revenue, according to IHS.
“Philips stated last year that, by spinning off Lumileds, the organization would be better positioned to compete for new business from outside customers that regard Philips as a competitor,” Fox says.
IHS says the growth in market share of Lumileds in 2014 was the result of an expansion in lighting, automotive, mobile camera flash and other areas. However, backlighting disappointed Philips in the previous year.
“The announcement today ends years of speculation about the future of Lumileds, during which Korean, Taiwanese and U.S. LED companies were variously rumored to be potential suitors,” Fox says. “[The announcement] will finally bring Lumileds some stability and help its staff and partners move forward with more clarity.”
Sonny Wu, co-founder and managing director of GSR Ventures and chairman of GO Scale Capital, said in a statement that the leveraged buyout firm will work to expand Lumileds’ opportunities by investing in its global centers of operation and in the growing general lighting and automotive industries. With a customer base that includes BMW, Volkswagen and Audi, Wu says “we expect to see significant growth and unparalleled inroads into new opportunities such as electric vehicles.”
GO Scale Capital is a new investment fund comprised of GSR Ventures and Oak Investment Partners and other partners including Asia Pacific Resource Development, Nanchang Industrial Group and GSR Capital. Investments from GO Scale Capital include electric vehicle battery vendor Boston Power and Xin Da Yang, an electric vehicle company in China.
Philips Lighting will remain a customer of Lumileds. After the separation with Lumileds, Philips Lighting will focus on growing lighting offerings in the market as well as furthering its creation of two new companies focused on health technology and lighting, as it announced in September 2014.
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