Philips' thwarted attempt to sell 80.1 per cent of its speciality lighting arm makes pending Chinese bids involving US tech assets look less certain. The Dutch group on Friday abandoned its agreement to hawk the stake in its so-called Lumileds unit - which manufactures LED components and lights for cars - to Chinese fund GO Scale Capital for $2.8 billion. The reason, according to the thwarted buyer: "unspecified concerns" raised by the Committee on Foreign Investment in the United States (CFIUS), an obscure branch of the US Department of the Treasury.
It's a face-palm moment for Philips, which touted GO Scale's long-term outlook and lighting knowhow when it agreed to the acquisition last year, despite the relatively limited track record of those involved. Now Philips Chief Executive Frans van Houten, who wants to shift the business away from lighting to focus on health care technology and consumer electronics, may have to go back to a host of private equity bidders like Carlyle, KKR and CVC he previously turned down.
The opacity of the deal approval process is a mitigating factor for Philips' management - for now, at least. CFIUS's mandate is to block deals only if the United States' national security is at risk. In a speech back in 2011, former deputy treasury secretary Neal Wolin said the office's processes were transparent and fair. But CFIUS has said nothing publicly in relation to the Lumileds deal. True, the business has a manufacturing facility in California as well as cutting-edge tech. But neither would seem to be enough cause for a rejection.
More From This Section
There may have been reasonable grounds to block GO Scale's bid. But CFIUS has overstepped the mark before: in 2014, Ralls Corp forced the U.S. government to explain the veto of the Chinese company's wind-farm project, with the parties finally settling their legal dispute in October last year. Either way, Philips' failed lighting deal has put other Chinese bidders more in the dark.
