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Philips sells semiconductor unit

Posted: 07 Aug 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Royal Philips Electronics? Kohlberg Kravis Roberts? Silver Lake Partners? AlpInvest Partners? XX?

Royal Philips Electronics made it official. It has announced it has divested and sold a majority stake in its Semiconductor business to a trio of equity firms: Kohlberg Kravis Roberts & Co. (KKR), Silver Lake Partners and AlpInvest Partners NV. Under the terms of the $10.6-billion deal, the three equity firms will acquire an 80.1 percent stake in Philips' semiconductors business, with Royal Philips retaining a 19.9 percent stake in this business.

The parent company estimates it will receive cash proceeds after tax and transaction-related costs of approximately $8.2 billion. The transaction is expected to close in the fourth quarter of 2006, subject to closing conditions, including governmental and regulatory approvals.

Upon completion of the transaction, Frans van Houten will relinquish his current positions as member of the board of Royal Philips Electronics and CEO of Philips' semiconductors business to become the president and CEO of the new standalone semiconductor company. The renaming of the new company will be announced in due course.

"This is a defining moment for both Philips and its semiconductors business," said Gerard Kleisterlee, president and CEO of Royal Philips Electronics, in a statement.

"As a stand-alone company, the semiconductors business will have every opportunity to realize its full potential and we are very pleased to have found strong partners that share our belief," he said. "As a business partner, we will remain strongly committed to the future success of the business. As Philips, we are completing our shift away from running cyclical activities, and can fully focus on building an even stronger company in Healthcare and Lifestyle around the brand promise of Sense and Simplicity."

As reported late last year, Royal Philips Electronics of the Netherlands stunned the industry by announcing plans to spin-off its chip unit, Philips Semiconductors. Last month, Royal Philips Electronics reiterated its intention to float or sell off a majority stake in its semiconductors division by the end of this year.

Then, last month, three of the biggest private equity firms are in the final stage of bidding for the semiconductor division of Philips Electronics, according to the Wall Street Journal.

According to sources, the bidders were Kohlberg Kravis Roberts & Co. teamed up with Silver Lake Partners; Permira Advisors of London linked with Texas Pacific Group; and Blackstone Group and Bain Capital Inc. together with Apax Partners Worldwide LLC and Francisco Partners Management LLC.

Recently, Philips' semiconductor unit reported sales of $1.53 billion in the second quarter, up 5 percent sequentially and up 12 percent over the like period a year ago. Operational profits quadrupled to $152 million, according to the Dutch-based company. For the third quarter, the company's chip sales are projected to grow by 5-to-9 percent, according to reports.

KKR and Silver Lake have made big headlines again. Seeking to reposition itself as a pure-play measurement company, Agilent Technologies Corp. last year sold its troubled semiconductor business to equity fund companies KKR and Silver Lake for $2.66 billion.

Rechristened Avago Technologies Pte, Agilent Technologies' former semiconductor products group became a standalone company late last year. Then, in January, Agilent gave further life to its proposed semiconductor test equipment spin-off, bestowing the name "Verigy" on the entity. The ATE spin-off recently filed an initial public offering.

- Mark LaPedus
EE Times




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