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Philips attracts private equity bids for lighting unit, say sources-Reuters

(Reuters) – Dutch electronics group Philips has attracted bids from several private equity groups for the majority of its lighting components business, up for sale as it focuses on higher-margin activities, several sources said on Wednesday.

Buyout groups including Bain, CVC, CD&R, KKR and Onex handed in indicative offers earlier this week valuing the business at between 2.5 billion euros ($3.1 billion) and 3 billion, the sources said.

The medical electronics-to-coffee machines group, which started making light bulbs 123 years ago, is splitting off its lighting business, whose earnings have been squeezed in a price war in light-emitting diodes (LEDs) kindled by Chinese rivals.
Separately and ahead of a potential spin-off of the division, it has combined its so called Lumileds and its car lights division into a stand-alone company and has mandated Morgan Stanley to find a buyer for the business, with 1.4 billion euros in sales.

Philips has said the lighting components business would be better placed to compete on a standalone basis for outside customers, which currently regard Philips as a rival. It intends to hold onto a minority stake, however, as about a fifth of Lumileds’s sales of 500 million are made to the parent.

Profit figures for the business have not been made public but sources said its core earnings or EBITDA are about 290 million euros. Peers such as Hella, Cree and Acuity trade in a range of 5.4 to 13.4 times expected earnings.

Banks are working on debt packages of 870 million to 1 billion euros, or 3-3.5 times EBITDA, a banking source said.

Philips, Morgan Stanley and the buyout groups declined to comment, except for Onex, which was not immediately available for comment.