LONDON Royal Philips Electronics has signed an agreement with a consortium consisting of Kohlberg Kravis Roberts & Co. (KKR), Silver Lake Partners and AlpInvest Partners NV for it to acquire an 80.1 percent stake in Philips' Semiconductors business, with Philips retaining a 19.9 percent stake in this business.
The deal values Philips' semiconductors business at approximately €8.3 billion which is based on a purchase price of €3.4 billion, €4.0 billion for debt and other liabilities, and €0.9 billion for Philips' remaining stake.
Frans van Houten, the CEO of Philips' Semiconductors business, will quit as a member of the board of Royal Philips Electronics when the acquisition is complete and become the president and CEO of the stand-alone semiconductors company which will be renamed later.
“Today's agreement with KKR, Silver Lake and AlpInvest represents an exciting foundation upon which our new semiconductors company can successfully grow and compete as a stand-alone company. The business, with its strong R&D capabilities and broad intellectual property portfolio, will continue to focus on strengthening its performance and presence in Mobile & Personal, Home, Automotive & Identification and Multi Market Semiconductors – our four key markets. We remain entirely committed to completing our successful business renewal program,” said van Houten.
Philips estimates it will receive cash proceeds after tax and transaction related costs of approximately €6.4 billion. The transaction is expected to close by the end of the year and is subject to closing conditions, including governmental and regulatory approvals.
“This is a defining moment for both Philips and its semiconductors business. As a stand-alone company, the semiconductors business will have every opportunity to realize its full potential and we are very pleased to have found strong partners that share our belief. As a business partner, we will remain strongly committed to the future success of the business,” said Gerard Kleisterlee, president and CEO of Royal Philips Electronics. “As Philips, we are completing our shift away from running cyclical activities, and can fully focus on building an even stronger company in Healthcare and Lifestyle around the brand promise of sense and simplicity.”
KKR, Silver Lake and AlpInvest, are all private equity investment companies. Between them their experience of buy-outs includes SunGard Data Systems Inc. in the U.S. and Avago Technologies Ltd. in Singapore.
The semiconductors division has around 37,000 employees worldwide and had sales in 2005 of €4.6 billion.