(Reuters) — Philips (NYSE:PHG) has attracted bids from several private equity groups for the majority of its lighting components business, up for sale as it focuses on higher-margin activities, several sources said yesterday.
Buyout groups including Bain, CVC Capital Partners, Clayton, Dubilier & Rice, Kohlberg Kravis Roberts and Onex handed in indicative offers earlier this week valuing the business at between €2.5 billion euros ($3.1 billion) and €3 billion, the sources said.
The medical electronics-to-coffee machines group, which started making light bulbs 123 years ago, is splitting off its lighting business, whose earnings have been squeezed in a price war in light-emitting diodes (LEDs) kindled by Chinese rivals.
Separately and ahead of a potential spin-off of the division, it has combined its so called Lumileds and its car lights division into a stand-alone company and has mandated Morgan Stanley (MS.N) to find a buyer for the business, with €1.4 billion in sales.
Philips has said the lighting components business would be better placed to compete on a standalone basis for outside customers, which currently regard Philips as a rival. It intends to hold onto a minority stake, however, as about a fifth of Lumileds’s sales of €500 million are made to the parent.
Profit figures for the business have not been made public but sources said its core earnings or EBITDA are about €290 million. Peers such as Hella, Cree and Acuity trade in a range of 5.4 to 13.4 times expected earnings.
Banks are working on debt packages of €870 million to €1 billion, or 3-3.5 times EBITDA, a banking source said.
Philips, Morgan Stanley and the buyout groups declined to comment, except for Onex, which was not immediately available for comment.
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