Royal Philips Electronics has sold a majority stake in its semiconductor business to a group of private equity firms. The Dutch electronics giant signed the agreement with Kohlberg Kravis Roberts & Co (KKR), Silver Lake Partners and AlpInvest Partners NV, through which the consortium will acquire an 80.1 per cent stake in Philips’ Semiconductors. Under the terms of the agreement Philips will retain a 19.9 per cent stake in the business.
The transaction puts the enterprise value of Philips’ semiconductors business at approximately €8.3bn – €3.4bn for the overall purchasing price, €4.0bn for debt and other liabilities, and €0.9bn for Philips’ remaining stake. Philips estimates it will receive cash proceeds after tax and transaction related costs of approximately €6.4bn.
The transaction is expected to close in the fourth quarter of 2006, subject to closing conditions, including governmental and regulatory approvals.
Philips’ Semiconductors is a supplier of silicon for technologies including mobile communications, consumer electronics, digital displays, contactless payment and connectivity, and in-car entertainment and networking. The firm has approximately 37,000 employees worldwide.
Gerard Kleisterlee, president and CEO of Royal Philips Electronics, said that the deal will allow the firm to complete its ongoing shift away from running “cyclical activities”, and fully focus on healthcare and lifestyle technology.
Upon completion of the transaction, Frans van Houten will relinquish his current positions as member of the board of Royal Philips Electronics and CEO of Philips’ Semiconductors business to become the president and CEO of the new stand-alone semiconductors company. The renaming of the new company will be announced in due course.
Egon Durban, a managing director of Silver Lake Partners, commented: “We believe the Philips’ Semiconductor business is well positioned to pursue and achieve significant expansion.”
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