Philips to sell Lumileds majority share for $1.5 billion

Updated 13 December 2016

Philips to sell Lumileds majority share for $1.5 billion

THE HAGUE: Dutch electronics giant Philips has announced Monday the sale of a majority share in its Lumileds LED lighting business for $1.5 billion, after canceling the spinoff earlier this year over US regulatory concerns.
“Royal Philips today announced that it has signed an agreement to sell an 80.1-percent interest in Lumileds to certain funds managed by affiliates of (US-based) Apollo Global Management,” the Amsterdam-based company said in a statement.
Philips said it expected the deal to net the firm approximately $1.5 billion (1.41 billion euros) in cash as well as equity, adding Lumileds is valued at around $2.0 billion.
The new move comes after Philips dropped a planned $2.8-billion sale to Beijing-based GO Scale in January when neither company could convince the US Committee on Foreign Investment (CFIUS) to clear the deal.
“With this transaction, we will be completing an important phase of the transformation of our portfolio and I am satisfied that in the Apollo managed funds we have found the right owner for Lumileds,” said Philips CEO Frans van Houten.
Describing the loss of the earlier GO Scale deal as a “setback,” Van Houten told reporters: “We are confident that this time we will succeed.”
But Van Houten admitted that “given the backdrop of the CFIUS outcome we had to look for a buyer in a considerably smaller landscape of potential buyers.”
“Therefore the premium of the previous process could not be replicated this time,” he told reporters.
The transaction is expected to be completed in the first half of 2017, subject to regulatory approvals.
Van Houten however stressed that with retaining a 19.9 minority stake, Philips also had access to so-called preferred equity shares, meaning the Dutch company will receive an additional income “if Lumileds performs well.”
Jos Versteeg, an analyst at the Amsterdam-based Theodoor Gilissen private bank told AFP that “Mr Van Houten is a very good deal-maker and he made the best deal under the circumstances.”
“It’s always very difficult to make a deal when your best partner has to quit because he’s not allowed to sell,” Versteeg said.
So “at first glance it may seem disappointing, but there is a good part to it as well... if Apollo manages to squeeze some profit out of Lumileds” the price for Philips’ 19.9 percent retaining share will be higher, he said.
Durk Veenstra, market commentator with the private RTLZ economics news channel, said “the price that’s being paid for now by Apollo is (almost) half of what the Chinese were prepared to pay.”
“In short, it hurts (Philips) from all sides,” he said.
Philips in 2014 announced it would split in two, separating its health care-lifestyle arm from its historic lighting section in a move to streamline operations.
Lumileds, which makes LED and car lighting components has operations in more than 30 countries and employs at least 8,800 workers worldwide, including at its research and development and production facilities in California’s Silicon Valley.
Last year it clocked sales of around $2.0 billion.
Philips, which sold its first light bulb a few years after it was founded in 1891, has for the past dozen years focused on medical equipment, which now accounts for more than 40 percent of sales.
Founded in the southern Dutch city of Eindhoven, Philips’ health care arm employs some 70,000 people in 100 countries.
New York-based Apollo is a major global alternative investment manager with assets under management of approximately $189 billion in private equity, credit and real estate funds.
“We look forward to partnering with Philips... and Lumileds, and bringing in Apollo’s resources to support the continued growth and innovation of this industry-leading business,” Robert Seminara, senior partner at Apollo, said.


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.