Deal Reporter
Philips [AMS:PHIA] has mandated Goldman Sachs to handle the demerger of its Lighting business while Rothschild will advise on its eventual IPO, two sources said.
Philips and Goldman Sachs declined to comment. Rothschild did not reply to a call for comment.
The company has given strong indications both in public and private that it intends to carry out the IPO, although it is still open to buyers in what has been characterised as a dual track process, the two sources and a sector banker said.
Financial investors are the most likely to be interested, perhaps with a view to consolidating the market and launching an IPO themselves, the first source said.
Philips’ 7 May AGM approved the separation of the Lighting business and said the legal process would take at least until the end of 2015, while the IPO is planned to take place in the first half of 2016.
The parent intends to create two businesses – HealthTec and Lighting Solutions – which CEO Frans van Houten declared would have “the right fundamentals for profitable growth in their fields”.
But he also said “alternatives will continue to be carefully reviewed” in respect of the eventual ownership of Lighting.
A trade buyer is a long shot given the likely antitrust hurdles inherent in joining one of the world’s largest lighting business with any sector company big enough to afford it, the first source and the banker agreed.
Philips has a global market share that is 1.6x higher than its nearest competitor in the conventional lamps and drivers market, according to a company presentation from last year.
Across its four regions of Europe, North America, Latin America and Asia Pacific, and three lighting segments (light sources and electronics, consumer luminaires, and professional lighting solutions), Philips classes itself outside the top three companies only for consumer luminaires in the Americas.
As previously reported, should Philips pursue the IPO option, it is likely to see appetite for its Lighting Solutions business as a value or dividend stock.
Philips Lighting’s comps previously suggested to this news service, include Osram [ETR:OSR], Acuity [NYSE:AYI] and Zumtobel [VIE:ZAG], trade at an average EV/TTM EBIT of 43.4x, based on yesterday’s closing share prices according to Dealreporter analytics. Applying this average would give the Philips Lighting business an EV of EUR 12.7bn.
Excluding Zumtobel, which was hit by special items, the Philips Lighting EV would lower to EUR 10.5bn.