THE HAGUE, The Netherlands — Dutch electronics giant Philips announced Friday that a planned $2.8 billion majority share sale of its Lumileds lighting unit to Beijing-based GO Scale Capital has been cancelled because of U.S. regulatory concerns.
Both companies failed to convince the Committee on Foreign Investment in the United States (CFIUS) to clear the deal, Philips said, adding that it is seeking another buyer.
“We will now engage with other parties that have expressed an interest in exploring strategic options for Lumileds,” Philips CEO Frans van Houten said. “I am very disappointed about this outcome, as this was a very good deal for both Lumileds and the Go Scale Capital-led consortium.”
Philips and GO Scale have now withdrawn their CFIUS filing, the Dutch company said, calling the U.S. regulatory concerns “unforeseen.”
Philips will continue to report the Lumileds business as “discontinued operations.” Lumileds has research and development and production facilities in California’s Silicon Valley.
Philips announced in October that the sale of an 80.1% majority share stake was in doubt because of unspecified CFIUS concerns, but at the time it said they would be addressed.
GO Scale Capital said that, had the transaction gone through, it “would have combined Lumileds’ world-leading technology and know-how with the highly competitive LED manufacturing industrial base in China. … Unfortunately, all such efforts fell short of addressing unexplained (U.S.) government concerns.”
“The decision by the CFIUS is a pure piece of trade politics,” said Jos Versteeg, analyst at the Amsterdam-based Theodoor Gilissen private bank. “It’s clear that the Americans don’t want the technology to go to China.”
“However, the deal will eventually go through, but with another buyer,” he said, adding that the setback was unlikely to impact on Philips’ strategy of moving away from lighting in the healthcare-lifestyle sector. It’s unlikely though that Philips will get the same price as was offered by GO Scale Capital.”
Philips announced in 2014 that it would split in two, separating its healthcare-lifestyle arm from its historic lighting section in a move to streamline operations. The split is expected to be completed some time this year, with analysts predicting that Philips could eventually sell off lighting, one of its core businesses for many years.
Philips, which sold its first light bulb a few years after it was founded in 1891, has focused for the last decade or so on medical equipment, which now accounts for more than 40% of sales.
Lumileds has operations in more than 30 countries and employs around 8,800 workers world-wide.
GO Scale Capital is a new investment fund sponsored by GSR Ventures and Oak Investment Partners with offices in Beijing, Hong Kong and Silicon Valley. Its current investments include US-based Boston Power, which makes electric vehicle batteries, and China-based Xin Da Yang which produces electric vehicles.
Originally founded in the southern Dutch city of Eindhoven, Philips employs 112,000 people worldwide.
Copyright Agence France-Presse, 2016