Sat, Jan 23, 2016 - Page 15 News List

Philips cancels Lumileds sale to GO Scale

‘UNEXPLAINED CONCERNS’:Officials from both firms said they failed to adequately address worries by a US regulator, which did not give approval for the transaction

Bloomberg

Royal Philips NV canceled a planned US$2.8 billion sale of its lighting components unit to a consortium led by GO Scale Capital of China because of opposition from a US regulator charged with vetting foreign acquisitions to protect national security.

The US government’s Committee on Foreign Investment in the United States (CFIUS) had raised concerns about the agreement and “clearance has not been granted,” Amsterdam-based Philips said in a statement yesterday.

Philips had agreed last year to a sale of an 80.1 percent stake in its Lumileds unit that makes LED components and automotive lights.

Termination of the agreement does not involve a breakup fee or hurt the planned process of separating the lighting business, which is an “independent transaction,” Philips said.

Philips is splitting off lighting to focus on consumer healthcare.

The CFIUS has scrutinized deals that involve semiconductor technology moving to China. Lumileds has a US subsidiary based in San Jose, California, that has research and development, as well as manufacturing facilities.

The end of the deal is a blow to Philips CEO Frans van Houten as he works to turn the company’s focus toward the US$125 billion healthcare industry and away from lighting.

For its part, GO Scale Capital chairman Sonny Wu (伍伸俊) said in a statement that the company would pursue technology acquisitions.

GO Scale Capital’s and Philips’ “persistent” efforts to get clearance for the deal “fell short of addressing unexplained government concerns,” Wu said.

He vowed to push ahead to build the leading LED lighting company that would allow China to have a global LED industry.

“We didn’t sufficiently address the concerns raised by CFIUS,” a Philips spokesman said.

During the period when Philips was trying to push the deal past US regulators, “the business fundamentals of Lumileds have probably deteriorated, so it will be tougher to realize the same price as before,” Rabobank Groep NV analyst Hans Slob said by telephone. “It’s a pretty big disappointment.”

Philips is “engaging” with other companies that have expressed interest in Lumileds, it said in the statement.

KKR & Co LP, CVC Capital Partners and Bain Capital LLC unsuccessfully bid for Lumileds in March last year.

With sales last year of about US$2 billion, Lumileds is the biggest supplier of lamps to the automotive industry, equipping one out of every three cars in the world, according to the company’s Web site.

The stand-alone company was created in 2014 to combine the LED components and automotive lighting businesses.

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