Philips Pullout From Lifestyle Sale Challenged by Funai

Royal Philips NV (PHIA)’s dispute with Funai Electric Co. (6839) over the botched sale of its Lifestyle Entertainment multimedia-products unit intensified after the Japanese competitor filed a counterclaim in arbitration court.

Funai is seeking damages because Philips was unable to complete the separation of the business in a timely fashion, even after a deadline for completing the transaction was put back twice, and its description of the asset lacked clarity, the Osaka-based company said today in a statement. Joost Akkermans, a spokesman at Amsterdam-based Philips, declined to comment.

Philips ended talks on selling the audio and video equipment division to Funai and started arbitration proceedings in October, saying the Japanese company was in breach of contract and responsible for the breakdown of the 150 million-euro ($205 million) disposal. The spat deals a blow to Philips Chief Executive Officer Frans van Houten’s efforts to phase out multimedia offerings such as DVD players.

“Although Funai was continuing with negotiations to complete the transaction based on its good business relationship of mutual trust with Philips for over 25 years, Philips suddenly and unilaterally broke off negotiations,” Funai said.

Philips rose as much as 0.4 percent and was trading up 0.2 percent at 25.30 euros as of 10:21 a.m. in Amsterdam. The stock has gained 27 percent this year, valuing the company at 23.7 billion euros.

Seeking Buyer

Philips, the world’s biggest lightbulb maker, is seeking a new buyer for the multimedia division while continuing to run it as a stand-alone entity called WOOX Innovations, named after the company’s stereo-speaker technology. The manufacturer’s consumer-electronics business has shrunk over the years as customers flocked to competitors such as Sony Corp. (6758) and Apple Inc. (AAPL) for mobile and music devices. WOOX Innovations has headquarters in Hong Kong and sales of 1.2 billion euros.

“The profitability of the business has been notably declining this business year,” Funai said today.

To contact the reporters on this story: Andrew Noel in London at anoel@bloomberg.net; Martijn van der Starre in Amsterdam at vanderstarre@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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