Philips Intends IPO for Lighting Division in Health Care Bet

Royal Philips NV’s split with its lighting division will probably involve selling shares in the unit as the Dutch manufacturer shifts focus to health technology.

“It is the current intention to effectuate the separation of the lighting business through an initial public offering,” though other options for the division are still being reviewed, including a private sale, Amsterdam-based Philips said in a statement Tuesday outlining the agenda for its May 7 annual shareholders meeting.

The separation of the division, the world’s biggest maker of lamps and light bulbs, mirrors Munich-based Siemens AG’s move in mid-2013 to spin off Osram Licht AG as an industrywide shift toward more-efficient light-emitting diodes adds to competition. Since its debut on the Frankfurt exchange, Osram’s stock has surged more than 72 percent, even as the manufacturer has struggled with cheaper LEDs from competitors.

“I get the impression that, because of lighting’s history, Philips wants to pursue what offers the best perspectives for the division, and not particularly value maximization,” Robin van den Broek, an analyst at ING Groep NV in Amsterdam, said by phone, adding that an IPO offers the best options to expand the business.

The total value of Philips and the businesses it’s getting rid of may reach about 25.5 billion euros ($28.9 billion), according to the average estimate of five analysts surveyed by Bloomberg. That figure follows an estimated 8.5 billion-euro reduction stemming from restructuring and other costs, net debt and the value of the company’s innovation, groups and services support unit.

Stock Rises

Philips rose as much as 0.8 percent to 26.30 euros, the highest intraday price since Jan. 26, and was trading up 0.1 percent as of 2:36 p.m. in Amsterdam. The stock has gained 8.2 percent this year, valuing the company at 24.4 billion euros.

While two Dutch companies have already made their way to the Amsterdam stock exchange this year, trading circumstances may worsen by the time Philips seeks a listing, said Peter Olofsen, an analyst at Kepler Cheuvreux.

“A sale or spinoff is less complex and easier than an IPO, and it’s also less risky,” Olofsen said.

Philips boasts experience in putting divisions onto the stock market as well as in large disposals. ASML Holding NV, a former Philips unit that’s Europe’s largest semiconductor-equipment supplier, first offered shares in 1995 and now has a market capitalization exceeding 40 billion euros. Philips sold its former semiconductor business, now called NXP, to a group of buyers led by KKR & Co. in 2006.

Lighting Components

The Dutch manufacturer is disposing of a 60 percent to 80 percent stake in its lighting-components unit in a separate process. Philips has said it expects binding bids by the end of March in an effort to complete the disposal by mid-2015. That holding would be valued at 2.4 billion euros, excluding any of the earlier mentioned costs, according to analyst estimates.

The company is sticking to separate sale plans for the lighting and lighting-component units because the businesses lack a strategic fit, Chief Executive Officer Frans van Houten said in January.

At the annual meeting, investors will vote on re-appointing Van Houten, Chief Financial Officer Ron Wirahadiraksa and Pieter Nota, head of the consumer-electronics division, to another four-year term on the board.

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