KKR & Co and CVC Capital Partners are nearing an agreement to buy Royal Philips NV's lighting components unit, accelerating the Dutch firm's shift toward medical technology, people with knowledge of the situation said.
The private-equity firms have offered to buy 80 per cent of the unit, with a bid valuing the whole of the business at about euro 2.5 billion ($2.7 billion), the people said, asking not to be identified discussing a private matter. Philips would retain the remaining shares.
While a deal with KKR and CVC could be announced as soon as next week, no final decision has been made and a rival may still make a last-minute comeback, the people said. Bain Capital LLC, the Boston-based buyout firm that was also one of the final bidders, is no longer in the running at this stage, one of the people said.
A third bidder, comprising a group of Asian investors, is still involved in negotiations, another person said. While that group is seeking financing for a bid that may be 15 percent higher, Philips probably prefers to work with a PE partner, one of the people said.
Philips, based in Amsterdam, is shedding both the lighting- components business and a larger division that produces fixtures and luminaires to focus on more-lucrative sales of medical equipment.
Industry shift
A shift toward smaller and more energy-efficient light emitting diodes, or LEDs, has intensified competition with new entrants from the semiconductor industry, prompting rival Siemens AG to also exit the lighting market two years ago.
A spokesman for Philips declined to comment on the deal. Representatives for CVC, KKR and Bain also declined to comment.
Shares of Philips were little changed at euro 27.17 as of 9:13 am in Amsterdam, valuing the company at about euro 25.4 billion.
The components business made euro 141 million in profit last year, and had euro 1.42 billion in sales.
Philips' exit from the lighting industry is a significant departure from its history. The company has sold lighting products since its foundation in 1891.
