Royal Philips ($PHG) has big plans in HealthTech. But to execute on them, it needs to rid itself of its lighting businesses and, in the process, gain some liquidity to reinvest into health technology, which is expected to be the future of the transitioning industrial conglomerate that has traditionally spanned consumer, healthcare and lighting businesses.
The company has confirmed that it will do an IPO for its Lighting business that's reportedly valued at up to $6.4 billion. It plans to sell at least a 25% stake in the offering on the Euronext Amsterdam exchange. But it hasn't disclosed when the offering will price.
The move has been a long time in coming. Philips first said in September 2014 that it would separate off the Lighting business either through a sale or an IPO. The company already created a standalone structure for Philips Lighting as of Feb. 1.
Philips hit a setback last year when the planned sale of another lighting business, Lumileds, which includes LED components and automotive lighting, fell through on concerns from U.S. regulators. It had been slated to sell an 80.1% stake in Lumileds for almost $3 billion to Chinese company GO Scale Capital. Philips has said it will offer an update on the efforts to dispose of Lumileds during the second half.
But in the meantime, roughly $10 billion that could be directed to supporting its HealthTech priorities remains tied up in the lighting businesses--even after a few years of effort to divest of them. That makes Wall Street nervous and it's tough for investors to invest in the stated future priorities of the conglomerate.
Philips was off 2% on the IPO news on May 3. It's still up 6% so far this year. But overall, Philips investors aren't enthused about the HealthTech refocus effort first announced in September 2014. Shares are down roughly 8% since then.
- here is the announcement