Royal Philips NV of Amsterdam, The Netherlands (the world's largest lighting producer) has agreed to sell an 80.1% stake in its combined LED components and Automotive lighting business to GO Scale Capital, a new growth-stage investment fund sponsored by GSR Ventures and Oak Investment Partners. Philips will retain the remaining 19.9% interest (including a 34% stake in the Lumileds US operations).
With about 8300 staff in more than 30 countries, Lumileds supplies lighting components to the general illumination, automotive and consumer electronics markets, and generated revenue of about $2bn and a double-digit EBITA margin in 2014.
The transaction values the business at about $3.3bn. Philips expects to receive cash proceeds (before tax and transaction related costs) of about $2.8bn and a deferred contingent payment of up to $100m. The deal is expected to be completed in third-quarter 2015 (subject to closing conditions, including customary regulatory approvals).
The new firm will continue under the name Lumileds, led by CEO Pierre-Yves Lesaicherre. Philips says that it will remain an important customer of Lumileds and will continue the existing innovation and supply partnership. The transaction includes the transfer of a broad portfolio of more than 600 patent families related to LED manufacturing and automotive lighting from Philips to Lumileds.
With consortium partners including Asia Pacific Resource Development, Nanchang Industrial Group and GSR Capital, the GO Scale Capital team says it has deep technology expertise and a track record in scaling up disruptive technologies in China. Current investments include electric-vehicle battery maker Boston Power and Xin Da Yang (a fast-growing Eco-EV company in China). Through past investments in the LED industry, it has access to complementary technologies and manufacturing capacity, complementing Lumileds' high-power LED manufacturing footprint and expertise. The combination offers opportunities for the new firm to pursue further growth and scale through the GO Scale model, it is reckoned.
"The Lumileds acquisition will be a perfect example of how GO Scale turns cutting-edge technologies into world-class companies," says Sonny Wu, co-founder & managing director of GSR Ventures and chairman of GO Scale Capital, who will serve as interim chairman of Lumileds. "GO Scale Capital will focus on expanding Lumileds' opportunities by investing in its global centers of operation and in the fast-growing general lighting and automotive industries," he adds. "Through Lumileds' world-leading technology in key verticals such as LED chips, LED mobile flash and automotive lighting - together with a customer base including the likes of BMW, Volkswagen and Audi - we expect to see significant growth and unparalleled inroads into new opportunities such as electric vehicles."
"Philips is very positive about this transaction with GO Scale Capital as its principals are long-term, growth-oriented investors with a track record of building and expanding technology companies," comments Philips' CEO Frans van Houten. "We have significantly improved the performance of the LED components business and optimized the industrial footprint in the Automotive lighting business over the last few years, and established a strong management team and innovation pipeline. We are therefore convinced that, together with GO Scale Capital, Lumileds can grow faster, attract more customers and increase scale as a standalone company," he adds.
"Together with the new investors led by GO Scale Capital, Lumileds will extend its leading product portfolio of lighting components and continue to achieve robust growth," believes Lesaicherre.
Following the separation of Lumileds, Philips Lighting will focus on the lighting solutions markets. As announced last September, it has started the process of creating two companies focused on HealthTech and Lighting Solutions. As part of that strategic repositioning, Philips aims to transition the Lighting Solutions business into a separate legal structure through an initial public offering (although other options will continue to be reviewed).
