Philips to sell Lumileds share for $1.5B

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 U.S. regulatory concerns. Philips said it expected the deal to net the firm approximately $1.5 billion (1.41 million euros) in cash and equity. 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 U.S. 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. 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." 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 around 8,800 workers worldwide, including at its research and development and production facilities in California's Silicon Valley. 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. 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.