Royal Philips NV agreed to sell a majority stake in its lighting components unit to Apollo Global Management LLC in a cut-price deal valued at $2 billion after a U.S. national security panel blocked a more lucrative transaction with a Chinese buyer almost a year ago.
Philips will receive cash proceeds of $1.5 billion for Lumileds and participating preferred equity for the 80% stake, the Amsterdam-based company said in a statement Monday. Philips will retain the remaining shares.
After The Committee on Foreign Investment in the United States blocked the planned $2.8 billion sale to China’s Go Scale Capital Ltd. in January, CEO Frans van Houten said accepting the lower-premium offer from the U.S. private equity firm makes sense as it’s a safer bet. Apollo doesn’t have the same industrial synergies, so wouldn’t match Go Scale’s bid, he said, declining to give a detailed financial comparison.
“It’s quite a different deal,” van Houten said on a call Monday. The enterprise value “is obviously a setback for us. We’re confident that this time it will succeed, as Apollo is an American buyer.”—
The value was also lower than what analysts had expected. The final price is “marginally disappointing,” Morgan Stanley analyst Ben Uglow said by phone.
Philips fell 1.4% to 27.64 euros ($29.32) at 11:03 a.m. in Amsterdam, giving the company a market value of 26 billion euros ($27.58 billion).
Lumileds is the biggest supplier of lamps to the automotive industry, equipping one out of every three cars in the world, according to its website. The stand-alone company was created in 2014 to combine the LED components and automotive-lighting businesses. Philips, a Dutch maker of household goods like electric razors and hospital equipment including scanners, is selling the unit as it increasingly focuses on the global health-care market.
A market shift in the lighting industry toward smaller and more energy-efficient light-emitting diodes, or LEDs, which are reliant on semiconductor technology, has intensified competition and prompted rival Siemens AG to also exit the lighting sector.
As part of the strategy shift by Philips, van Houten also spun off and listed its general lighting division earlier this year. Philips Lighting, as the new company is called, is facing increased pressure in LED sales from competitors in Asia, as consolidation drives down prices.
The deal with New York-based Apollo is expected to close in the first half of 2017, Philips said.
By Andrew Noël and Oliver Sachgau