Koninklijke Philips NV (ADR) (NYSE:PHG) Claims Uncertainty About its $3.3-Billion Sale of Lumileds

Koninklijke Philips NV (ADR) (NYSE:PHG) is feeling uncertain about selling its Lumileds business to Go Scale Capital. The company claims that government restrictions might hinder the sale of the $3.3 billion business.

The electronics company announced on Monday that it was feeling rather shaky about the sale due to emerging regulatory concerns, particularly in the US. According to a prior agreement between the two parties in March, Go Scale Capital was supposed to assume 80.1% of the shares in the Lumileds business for $2.9 million.
Philips consolidated the LED components and lighting business into a single entity in 2014.

Philips released a statement in a news release claiming that it will continue to work with Go Scale Capital to come up with solutions that will address the concerns of the Committee on Foreign Investment in the United States. Philips is supposed to retain 19.9% of the shares after the transaction is complete. The transaction was originally supposed to be completed in the third quarter.

The automotive lighting and LED component business has been working out in the company’s favor. Last year, Philips posted sales worth $2 billion. The company has operations in more than 30 countries all around the world. It also employs more than 8,000 people.

Selling the business was part of the company’s plan to restructure its operations especially in areas where growth is continuing. Philips recently updated third quarter earnings on the Lumileds sales revealing an astounding profit of $357 million.

The third quarter earnings might be attractive, but the firm’s sales were lacking especially in the emerging markets. Philip’s CEO, Frans van Houten stated that currency volatility caused the low growth rates in the foreign markets. The company expects the situation to get better with time.

There are concerns that the regulatory concerns might cause the deal to go stale. If the company manages to handle the situation with the CFIUS, there will most likely be a delay in the completion of the agreement.

Sources: reuters