Diversified Dutch firm Royal Philips will sell 80.1 per cent stake in its combined LED components and automotive lighting business for about USD 2.8 billion to a consortium led by GO Scale Capital.
The transaction pegs the business at an enterprise value of approximately USD 3.3 billion. A new company will be formed under the name Lumileds, led by CEO Pierre-Yves Lesaicherre for the business, the company said in a statement.
"Philips expects to receive cash proceeds, before tax and transaction related costs, of approximately USD 2.8 billion and a deferred contingent payment of up to USD 100 million," it added.
The company further said its lighting solutions business will remain an important customer of Lumileds and will continue the existing innovation and supply partnership.
"The transaction is expected to be completed in the third quarter of 2015, subject to closing conditions, including customary regulatory approvals," it said.
Commenting on the development, Royal Philips CEO Frans van Houten said: "Philips is very positive about this transaction with GO Scale Capital as its principals are long-term, growth-oriented investors with a track record of building and expanding technology companies."
GO Scale Capital is a new investment fund sponsored by GSR Ventures and Oak Investment Partners. The consortium partners are Asia Pacific Resource Development, Nanchang Industrial Group and GSR Capital.
Sonny Wu, co-founder and managing director of GSR Ventures and chairman of GO Scale Capital will serve as interim chairman of Lumileds following the completion of the transaction.
Together with a customer base including the likes of BMW, Volkswagen and Audi, the company expect to see significant growth and make inroads into new opportunities such as electric vehicles, Wu added.
Lumileds CEO Pierre-Yves Lesaicherre said: "I am convinced that together with the new investors led by GO Scale Capital, Lumileds will extend its leading product portfolio of lighting components and continue to achieve robust growth."
Lumileds has operations in more than 30 countries and has approximately 8,300 employees worldwide. In 2014, it generated sales of approximately USD 2 billion and a double-digit EBITA margin.
Following the separation of Lumileds, Philips Lighting will focus on lighting solutions markets in which it has leading market positions.
As part of strategic repositioning announced in 2014, Philips started creating two companies focused on HealthTech and Lighting Solutions. It had said that it would transition its lighting solutions business into a separate legal structure.
"It is the current intention to effectuate the separation through an initial public offering, although other options will continue to be reviewed," the company said.
