[Breaking News] U.S. Regulators Oppose Philips Sale of Lumileds

Philips plan to sell Lumileds to Chinese investment consortium led by Go Scale Capital for US $2.8 billion might “unravel following opposition from U.S. regulators,” reported Bloomberg on Monday.

In an exclusive interview with Bloomberg Philips CEO Frans van Houten said the company will work out the issues with Go Scale Capital, and address concerns raised by CFIUS. The company's split of Lumileds is not going as smoothly as planned. (All photos courtesy of Philips)

In its latest third quarter 2015 revenue statement, Philips offered an update on the proceedings of Go Scale Capital’s acquisition of Lumileds that pointed to uncertainties involved in the spin-off:

“In the course of seeking regulatory approvals regarding the sale of an 80.1% interest in Lumileds to a consortium led by GO Scale Capital, the Committee on Foreign Investment in the United States (CFIUS) has expressed certain unforeseen concerns. Philips and GO Scale Capital will continue to engage with CFIUS and will take all reasonable steps to address its concerns, but given these, the closing of the transaction is uncertain.”

GO Scale and Philips are working on a solution to address the concerns, and working to gain approval from the regulatory authority, Go Scale Chairman Sonny Wu told Bloomberg reporters. Philips is determined to work out the deal and remains focused on closing the deal, said Philips CEO Frans van Houten in an interview with Bloomberg TV.

Following the announcement, Philips shares fell 3.5%, the most since Aug. 24, and traded 3% lower at EUR 23 (US $ 25.37) as of 9:07 a.m. in Amsterdam.

Philips expanded its leadership in the connected lighting business with the introduction of Philips Hue Lightstrip Plus, the Philips Hue wireless dimming kit and Philips Hue Bridge 2.0. The new bridge enables Philips Hue to interact with other Apple HomeKit devices and become voice-controlled.

For third quarter 2015, the company’s lighting business showed continual operational improvement, with the EBITA margin increasing by 40 basis points to 9.5% Year-on-Year. LED lighting comparable sales grew 24% and LED margins improved. Compared to third quarter of 2014, LED sales reached 44% of total Lighting sales. In contrast traditional lamp sales declined 15%, resulting in a comparable sales decrease of 3% YoY.

Philips announced plans to sell its former LED component and automotive lighting business, Lumileds to Go Scale Capital in March this year. At the time, the transaction value of the business enterprise was valued at approximately US $3.3 billion, and Lumileds originally projected the deal would be sealed by third quarter this year.

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