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Royal Philips sells off $2.8 billion lighting business, eyes growth in HealthTech

by Gus Iversen, Editor in Chief | March 31, 2015
With the $2.8 billion sale of 80.1 percent of its lighting business, Philips is poised to make new investments in HealthTech; the term it uses to describe a singular focus of health care and consumer lifestyle technologies.

"We currently intend to use the proceeds of the separation to deliver on our HealthTech strategy and aim to increase growth and drive profitability through a disciplined capital allocation policy," the company said in a shareholder letter dated March 19th.

The plan to sell off the LED and Automotive lighting business has been in the works since at least June of last year, but the announcement came today that an agreement had been reached with a consortium led by GO Scale Capital. The newly formed company will be called Lumileds.

Philips spun off its TV business in 2011. Audio and video technology went in 2013, and now the company will shed its lighting business — one that goes back to the company's founding in 1891. The company will adopt a singular concentration on technologies in health care, consumer lifestyle, and the increasingly blurred lines between them.

The vision for HealthTech strategy is also outlined in the shareholder letter. "A united HealthTech portfolio, enabled by a cloud-based digital health platform and big data analytics capabilities, will be uniquely positioned to capture the key opportunities in population health management, improved solutions for health systems and accountable care organizations, and coordinated care delivery across the health continuum."

As part of that strategic re-positioning, Philips will transition the remaining Lighting Solutions business into a separate legal structure, most likely through an initial public offering, although they are keeping their options open for the time being.

The transaction is expected to be completed in the third quarter of 2015.

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