Royal Philips ($PHG) disclosed a long-awaited deal to sell off 80.1% of its interest in its LED component and Automotive lighting business for $2.8 billion with an additional contingent payment for up to $100 million. This deal will free up a lot of cash for Philips to invest in HealthTech, which combines its healthcare and consumer groups and was disclosed last September as the sole focus of the company going forward.
Philips had said last June that it would combine the LED component business with its automotive lighting group and look for a third-party acquirer. The buyers are a consortium led by Go Scale Capital; they will hold 80.1% of the resulting company that will be dubbed Lumileds. Philips will retain the remaining 19.9% interest in the new company, which includes a specific holding of a 34% interest in Lumileds U.S.
This transaction isn't expected to close until the third quarter and values the LED components and Automotive lighting business at $3.3 billion--a much higher amount than Wall Street had anticipated.
"It's a good deal for Philips," ING Bank analyst Robin van den Broek told Bloomberg. Analysts had valued the entire asset as worth only about $2.7 billion.
The Lumileds business will be led by CEO Pierre-Yves Lesaicherre. It will continue to partner with Philips' remaining Lighting Solutions business for product development and supply.
The Lighting Solutions business is being transferred into a separate legal structure within Philips; it's expected to undergo an IPO in 2016, although other options remain under consideration, Philips said.
The biggest healthcare deal that Philips has made so far in its HealthTech refocus is for catheter-based imaging company Volcano, which it bought in February for $1.2 billion. At year end, Philips had €1.9 billion ($2 billion) in cash.
Go Scale Capital is an investment fund created by GSR Ventures and Oak Investment Partners. The consortium put together to acquire Lumileds includes Asia Pacific Resource Development, Nanchang Industrial Group and GSR Capital.
- here is the release
- and here is coverage from Bloomberg and Reuters