April 28 (Bloomberg) -- Gibson Brands Inc., the Nashville-based maker of guitars for Bob Dylan and Carlos Santana, agreed to buy the audio and home entertainment business of Royal Philips NV for $135 million bolstering its global expansion in Hi-Fi equipment.
As part of the transaction to acquire WOOX Innovations, 124-year-old Gibson will pay a brand license fee for an initial seven years, the companies said.
“This agreement is the most significant step yet in Gibson Brands’ journey to become the largest music and sound technology company in the world,” Chief Executive Officer Henry Juszkiewicz said in a joint statement today.
Gibson already picked up Hi-Fi separates brands TEAC and Onkyo. Founded by Orville Gibson in Kalamazoo, the company is looking to close the WOOX deal in the second half. It’s paying a reduced price versus the 150 million-euro ($207 million) price tag that Philips negotiated with Funai Electric Co. last year before both parties terminated the deal in October. The sale has no effect on the subsequent legal proceedings that erupted between Philips and Funai, Philips spokesman Joost Akkermans said.
The U.S. company manufactures the Les Paul electric guitar series, Baldwin piano’s and Wurlitzer organs.
Akkermans declined to give additional details on the license fee agreement beyond that it consists of a yearly base fee and a percentage of sales. The video business will remain part of Philips until a transfer to Gibson in 2017, though payment will follow as soon as the deal is closed, Akkermans said.
“With this transaction, we are taking another important step in Philips’ transformation to become a leading technology company in health and well-being,” Philips Chief Executive Officer Frans van Houten said in the statement.
Philips is focusing on higher-margin areas such as lighting products that save energy, and health and wellness offerings, to move away from its consumer-electronics past amid competition from Asian rivals such as Samsung Electronics Co. and Sony Corp. Earlier this year the electronics manufacturer reached an agreement to transfer a remaining 30 percent stake in television joint-venture TP Vision to joint venture partner TPV Technology.
The remote control branch now is the last remaining part of the multimedia business, Akkermans said. According to him this relatively small branch is different from the multimedia and TV businesses as it’s mostly business-to-business focused.
Philips’ shares fell as much as 1.2 percent to 22.92 euros, the lowest share price since August. Shares are 0.3 percent lower at 23.13 euros at 10:55 a.m. in Amsterdam, giving the company a market value of 21.7 billion euros.
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