Nortel Alum Taps Solar Kingpin for $2.8 Billion Philips PurchaseJonathan Browning
Royal Philips NV used its prowess producing light bulbs at the end of the nineteenth century to become a consumer giant with innovations including the compact disc. Now a group of Chinese buyers is spending $2.8 billion for Philips’s lighting components unit, adding to their own portfolio that stretches from electric cars to batteries.
The investors, led by former Nortel Networks Corp. executives with backing from a property tycoon, agreed Tuesday to buy 80.1 percent of the Lumileds business. Sonny Wu heads the consortium, which is acquiring operations in 30 countries producing light-emitting diodes used in mobile phones and BMW AG sedans.
Wu’s GO Scale Capital plans to expand Lumileds by tapping expertise at other portfolio companies that include electric-car maker Xin Da Yang and Lattice Power Corp., which develops cheaper and more efficient LED chips made from gallium nitride. He is partnering with Cheng Kin-ming, the Hong Kong real estate magnate who has amassed about $20 billion of Chinese solar power assets.
“This is something we have done before, scaling mature technologies in China,” Wu, who will be interim chairman of Lumileds, said Wednesday in an interview in Hong Kong. “This movie has played many times before.”
GO Scale Capital plans “significant” investment in Lumileds’s business in the Netherlands and U.S. and will expand production capacity in China, where it finds about a third of its customers, according to Wu. Philips, which is retaining the rest of the business, is getting a partner that won’t seek to shed operations as some private-equity firms would, he said.
“We’re not just buying this and moving it to China,” Wu said. “That’s the easy thing to do. We’re building this.”
The group plans to fund more than 40 percent of the purchase price with its own cash, with the rest coming from debt to be provided by U.S., European and Chinese banks, according to Wu. It expects to close the acquisition in two to three months, he said.
Wu built a relationship with Philips two decades ago, when he helped arrange Nortel’s investment in a Philips-backed chip foundry in Shanghai now known as Advanced Semiconductor Manufacturing Corp. One of his Nortel co-workers from that era, Allan Kwan, is now a venture partner at Oak Investment Partners which joined Wu in the Philips lighting acquisition.
‘Always the Underdog’
After growing up in southern China’s Guangdong province, Wu moved to Canada at age 13 and studied engineering physics at the University of British Columbia. He later earned a master’s of business administration at the Massachusetts Institute of Technology.
In 2004, Wu co-founded GSR Ventures, an early-stage and growth investment firm with offices in Beijing, Hong Kong and Silicon Valley. His fund bought a stake in Boston Power, which builds lithium-ion batteries for electric cars and buses.
For Lumileds, GO Scale Capital beat out a rival bidding group consisting of KKR & Co. and CVC Capital Partners. Philips began a sales process in June, and GO Scale became involved in November, according to Wu.
“We came into the process late,” he said. “We were always the underdog.”