(Adds potential valuation, background)
* Stake sale to private equity groups an option - sources
* Stock market listing as alternative solution - sources
* Process to kick off after summer - sources
By Arno Schuetze and Anjuli Davies
FRANKFURT, July 25 Philips has taken a
first step towards selling a stake in a lighting components
business it is currently carving out by appointing Morgan
Stanley to handle the sale process, three people familiar
with the matter said.
The Dutch company said last month that it would create the
division by merging its light-emitting diodes (LEDs) business
Lumileds and its automotive lighting businesses, which have
combined sales of about $1.8 billion.
Philips has said the business would be better placed to
compete on a standalone basis for outside customers which
currently regard the Philips group as a rival.
Profit figures for the business have not been made public
but one of the sources said that the margin of earnings before
interest, taxes, depreciation and amortization (EBITDA) over
sales was roughly 20 percent.
Peers like Cree or Acuity trade at 11.2 and
12.6 times their expected earnings respectively. Based on a
similar multiple, the Philips unit could be valued at more than
$4 billion in equity and debt.
Philips has already received interest from private equity
players. The process, which is due to kick off after the summer,
may or may not lead to a stake sale to financial investors, the
people said, adding that all options are currently still on the
table including a stock market listing.
Investors such as KKR, Advent, EQT, CVC, Cinven, Clayton
Dubilier & Rice are expected to bid for the asset, the sources
Philips, Morgan Stanley and the potential bidders declined
Private equity investors are generally keen on buying
businesses spun-off from companies in so-called "primary" deals,
as they usually leave more scope for change and eventually
"The rationale (of the deal) is to create a standalone
capital structure and governance structure so that the newly
created company can more easily seize opportunities and make
investments in the future," one of the sources said, speaking on
condition of anonymity as the matter is not public.
Under Chief Executive Frans van Houten, Philips is
reinventing itself after its TV, audio and video businesses
struggled for years to compete with low-cost Asian rivals and
prompted a spate of profit warnings at the firm. It has sold off
its television business, cut more than 5,000 jobs and
concentrated on growing its healthcare products.
The lighting business employs 8,500 staff and makes
components such as bulbs, auto headlights and high-powered LED
lamps. It will count BMW, Volkswagen and
the latter's Audi brand among its automotive clients.
Philips's remaining lighting unit - which provides large
lighting systems and services as well as light fittings and
lamps for the professional and consumer markets - will be a
major customer of the separate company.
(Reporting by Arno Schuetze and Anjuli Davies; Editing by
Ludwig Burger and Jane Merriman)