- Dutch manufacturer to list at least a 25 percent stake in unit
- Company will seek to sell remaining shares over several years
Royal Philips NV is planning to sell its lighting division through an initial public offering after the Dutch manufacturer focusing on health care and consumer goods failed to find a buyer during a search that lasted more than half a year.
Philips plans to list and sell at least 25 percent of the shares in the business in Amsterdam, the company said in a statement on Tuesday. It aims to offload the remaining stake “over the next several years.” The listing could value the unit at as much as 5.5 billion euros ($6.4 billion), people familiar with the process have said. The shares fell 2.2 percent to 23.38 euros at 12:01 p.m. in Amsterdam, the lowest since Feb. 29.
“We have concluded that an IPO is the best option,” Chief Executive Officer Frans Van Houten told reporters at a press conference. The company considered parameters including value and complexity, he said, as well as what’s best for employees and customers. The IPO scored better on all measures than the offers through a private sale, the CEO added, declining to say whether he rules out a last-minute knock-out bid.
The unsuccessful attempt to sell the business to potential investors said to include Blackstone Group LP and Apollo Global Management LLC leaves Van Houten with the longer and more complicated route of a stock market listing. Separating the lighting business, which dates back to 1891 when Frederik Philips and his son started selling incandescent lamps, will allow the company to concentrate on the global health-care market with equipment including scanners and consumer goods such as shavers and toothbrushes.
The CEO last week signaled that improving market conditions made an IPO increasingly probable. The company has been disappointed with bids during the auction process, according to people familiar with the matter, who asked not to be named. Moving ahead with a listing could be a way for Philips to value the company.
“You get a valuation this way and then somebody can take it off the market at a later stage,” Marcel Achterberg, an analyst for Bank Degroof Petercam, said by phone.
Philips has attracted interest in the division from companies including Blackstone and Onex Corp., a group led by Apollo, as well as Chinese investor GO Scale Capital, according to people familiar with the matter, who asked not to be named because the process was not public.
Melrose Inc. pulled out about a month ago as it had doubts over the division’s business outlook and a lack of data, some of the people said. CVC Capital Partners and KKR & Co., dropped out in February because of concerns about the unit’s outlook.
The lighting division reported 547 million euros in profit in 2015 and had 7.47 billion euros in sales, Philips said in the statement. Eric Rondolat will remain CEO of the unit and Rene van Schooten will stay on as chief financial officer, it said.
Philips is targeting an annual dividend for the lighting unit of 40 to 50 percent of its continuing net income to be paid out in cash, with the first payment expected in 2017.
Philips is the largest maker of lighting equipment, and it competes with Siemens AG and General Electric Co. in the market for health-care equipment. Siemens spun off its lighting arm, Osram AG, in 2013 and has retained a 17 percent stake. As Osram’s biggest shareholder, Siemens has since clashed with management over strategy and tried earlier this year to oust its CEO.