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Thu, Aug 03, 2006 - Page 10 News List

Philips shares rise on chip unit bid

BLOOMBERG

Shares of Royal Philips Electronics NV gained after the Wall Street Journal reported that Kohlberg Kravis Roberts & Co and Silver Lake Partners probably won the bidding for the company's semiconductor unit with an offer of more than 8 billion euros (US$10 billion).

The stock rose as much as 2.7 percent after the newspaper said the buyout firms beat two rival groups. An exact price couldn't be determined. The losing groups consist of Blackstone Group LP, Permira Advisors LLP and Texas Pacific Group; and Apax Partners Worldwide LLC, Bain Capital LLC and Francisco Partners LP, the newspaper said on its Web site, citing unidentified people familiar with the contest.

The report suggests the purchase will be the largest ever in the semiconductor industry, based on data compiled by Bloomberg stretching back to 2000.

"The speed at which this seems to be taking place is positive," said Maurits Heldring, an analyst at Kepler Equities in Amsterdam, who rates Philips shares "buy."

"The next question is what Philips will do with the money. I expect a combination of a stock buyback and acquisitions," he said.

Heldring had valued the chip unit at 7.1 billion euros.

The stock jumped 6.6 percent on July 24, its biggest gain in three years, after the Journal reported that bidders were in the final stage of negotiations to buy the semiconductor division.

Philips spokesman Jayson Otke declined to comment on the report.

Amsterdam-based Philips said on June 21 it planned an initial public offering or stake sale of the chip unit this year.

The value of the transaction would eclipse Texas Instruments Inc's US$6.6 billion acquisition of Burr-Brown Corp and Taiwan Semiconductor Manufacturing Co's (台積電) US$4.5 billion purchase of Worldwide Semiconductor Manu-facturing Corp (世大半導體) in 2000, according to Bloomberg.

In Europe, Philips trails Geneva-based STMicroelectronics NV and Munich, Germany-based Infineon Technologies AG in terms of semiconductor sales.

Philips said in June it may pursue a combination of selling shares in the chip unit to the public and to financial investors. The chip division generated operating profit of more than 700 million euros in 2004 and last year after losing about 1.5 billion euros in the preceding three years.

A sale by Philips would coincide with a transaction by Infineon AG, which is scheduling to raise as much as US$1.3 billion this year through an initial public offering of a stake in Qimonda AG, its memory chip division.

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