Philips offloads LED lighting components unit for $2.8 billion

The strategic sale will allow Philips to focus on other verticals.

Philips has agreed to sell an 80.1 percent stake in the company's lighting components division for $2.8 billion to Go Scale Capital, a technology fund that will seek to build the company's automotive LED business.

The deal, which heralds a bigger strategic move for Philips, will see the company spin off its main lighting division via a stock market flotation, with the Dutch group opting to concentrate on medical technology and selected consumer electronics in future.

The deal is expected to be completed in the third quarter of 2015 subject to regulatory approval. The newly formed company Lumileds will continue to act as a supplier to Philips.

Philips, which is the world's largest lighting manufacturer, estimates the value the sale of the lighting components subsidiary represents is $3.3 billion, including debt. The division comprises an automotive lighting unit and the Lumileds LED manufacturing business. The former made a 2014 profit of $154.6 million on sales of $1.6 billion.

Go Scale Capital, which is funded by GSR Ventures and Oak Investment Partners, has made other investments in LEDs and electric car battery technology. It plans to invest in and expand the business of using LEDs in cars. Go Scale's past investments include Boston Power, a US-based manufacturer of EV batteries, and Xin Da Yang, an Eco-EV company in China.

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