Philips to sell at least 25% of lighting arm in IPO

(Reuters) – Royal Philips (NYSE:PHG) plans to sell at least 25% of its lighting business, the world’s largest maker of lights, on the stock market to focus on its larger medical equipment operations, it said on Tuesday.

Chief Executive Frans van Houten said it was an “historic” decision for the Dutch company, which began as a lighting company in 1891. Analysts have valued the unit at about 5 billion euros ($5.8 billion).

Philips dropped the word “electronics” from its name in 2013, and has gradually disposed of most of the consumer products it was once known for, though it retains its shaver and toothbrush operations under a “personal health” division.

It announced the decision to sell lighting in 2014, but the process has taken two years as the company divided up its extensive patent portfolio and weighed whether a listing or sale to a private equity firm would be better for shareholders.

Barclays analysts said in a note they feared the slow pace of the lighting spin off meant it would take longer to improve performance at Philips’ remaining healthcare operations, which currently generate about two-thirds of group revenue.

Philips shares, which have traded in line with broader indexes during Van Houten’s five-year reign, were down 1.7% at 23.5 euros in early trade.

Some analysts have said a separate Philips lighting business could tie-up with rival Osram as the two battle price pressures in LED lighting and the decline of traditional bulbs.

The remaining healthcare-dominated business has also been tipped as a possible target for General Electric.

Philips said it would sell a stake of at least 25% in an initial public offering (IPO) of its lighting arm on Euronext Amsterdam. The exact timing will depend on market conditions, and it will sell the remainder over a period of years, it said.

The IPO decision had been flagged as “likely” during the company’s first quarter earnings report last week..

Philips hopes the unit will be attractive to investors due to its technology and dominant market positions, including the largest patent portfolio in the lighting industry.

“Philips Lighting has a global sales and distribution channel across approximately 180 countries … which it believes would be difficult for a competitor to replicate,” it said.

The lighting division had operating profit of 331 million euros in 2015 on sales of 7.47 billion euros. As a standalone company it will have about 950 million euros of debt.

Eric Rondolat, CEO of Philips Lighting, will lead the business through its IPO, and it will continue to use the Philips brand.

Goldman Sachs and JPMorgan will be global coordinators of the IPO.

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