Royal Philips (NYSE:PHG) yesterday said it’s considering an initial public offering next year for its legacy lighting business, even as it reviews bids from private equity shops and a new suitor from Asia.
"The separation is currently intended to be effectuated through an initial public offering, but other options will continue to be reviewed," the Dutch conglomerate said. A shareholders meeting is scheduled for May 7.
"We are proud to propose David Pyott to the company’s supervisory board," chairman Jeroen van der Veer said in prepared remarks. "Mr. Pyott has gathered in-depth knowledge of the pharmaceutical and healthcare industries, in North America as well as globally. His expertise will be invaluable in view of Philips’ transition into a company focused on HealthTech."
A consortium of private equity firms CVC Capital Partners and Kohlberg Kravis Roberts is reportedly leading the chase, although rival Bain Capital could still make a better offer, 3 sources familiar with the matter said last week.
And a surprise Asian consortium has emerged for the 123-year-old lighting business, which is said to be worth some €2.5 billion ($2.6 billion), 2 sources familiar with the matter said.
Chinese light-emitting diode startup Lattice Power, working with investors GSR Ventures and Singapore state fund Temasek, has expressed interest in the business, a move that could potentially foil the chances of rival bids from buyout groups, they said.
"They have put in a last-minute bid," 2 of the sources said, adding that it’s expected to have been competitive as it would otherwise would have no chance at this stage of the auction.
"It looks like the Chinese are there. But it is unclear if their chances are very big," another source said.
Philips’ adviser Morgan Stanley aims to enter exclusive talks with 1 of the bidders early next week, wrapping up a process which started a year ago when the Dutch electronics group combined its Lumileds and car lights divisions into a standalone company.
Spokespeople for Philips, CVC, KKR and Bain Capital declined to comment, while representatives for Lattice, GSR, Temasek and Morgan Stanley were not available for immediate comment.
Lattice Power, a small company which last year secured $80 million in funding by Asia Pacific Resources Development Investment, already has some connection to Philips, as it made James Haworth, a former Philips executive, the head of its U.S. operations.
Philips has vowed to focus on higher-margin activities under pressure from Chinese makers of LEDs.
In 2014, Philips’ Lumileds/automotive business posted earnings before interest, tax and amortisation of €172 million ($180 million) on sales of €1.42 billion ($1.49 billion).
Peers such as Hella, Cree and Acuity trade in a range of 6.6 to 13.4 times expected EBITA.
($1 = €0.9537) Material from Reuters was used in this report.