Royal Philips Electronics announced it has agreed to sell an 80.1 percent stake in its semiconductor unit to a private investment consortium for 6.4 billion euros (US$8.2 billion).
The consortium, made up of US-based private equity firms Kohlberg Kravis Roberts & Co and Silver Lake Partners along with Dutch-based AlpInvest Partners NV, will buy the stake while Amsterdam-headquartered Philips will retain the remaining 19.9 percent stake in the business, Philips said in a statement on Thursday.
Philips shares rose more than 2.3 percent in early trading yesterday on the Amsterdam Stock Exchange to 26.33 euros as traders reacted positively to the news.
"This is a defining moment for both Philips and its semiconductors business," Philips President and CEO Gerard Kleisterlee said. "As a stand-alone company, the semiconductors business will have every opportunity to realize its full potential and we are very pleased to have found strong partners that share our belief."
Kleisterlee said that the sale will allow Philips, best known for its consumer electronics products, to "fully focus" on its health care and lifestyle products.
Philips was the world's ninth-largest maker of semiconductors by sales last year.
Operating profit at the semiconductor unit was 307 million euros last year on sales of 4.6 billion euros.
The unit currently achieves more than 90 percent of its sales outside Philips including to customers such as carmakers and mobile phone companies.
FOCUSED ON GROWTH
"With the support of the consortium and Philips as an investor, the company will continue to innovate in order to provide its customers with leading-edge solutions and products that drive growth," Johannes Huth, a member of Kohlberg Kravis Roberts and Co, said in a statement.
Egon Durban, a managing director of Silver Lake Partners, said the group believes the semiconductor unit is "well positioned to pursue and achieve significant expansion."
The transaction is expected to be completed in the fourth quarter of this year, subject to closing conditions, including governmental and regulatory approvals, Philips said.
The company said in a statement it plans to return 4 billion euros to shareholders by the end of next year through a combination of dividends and share repurchases and will also look for chances to invest in "additional opportunities for high-margin growth, both organically and through acquisitions."