June 21, 2006 – Royal Philips Electronics NV said it plans to sell off a majority stake in its semiconductor division by the end of this year via an IPO and/or a sale of shares to investors. The company will maintain a minority position as it pursues other opportunities such as a merger, what it termed “industry consolidation opportunities.”
Financial analysts quoted by Reuters and the Associated Press suggested the chip unit could be valued at 5-6 billion euros, and noted that Philips wanted to sell the unit outright, but apparently there were no takers, or at least not at an agreed-upon price. “Philips said it wanted to make its semiconductor unit stronger and that it needed bigger scale to compete. The logical step was to find a partner and this appears to have failed,” said analyst Eric de Graaf at broker Petercam, quoted by Reuters.
In a statement, Gerard Kleisterlee, Philips president and CEO, noted that the selloff of its chip unit is part of a plan to move away from high-volume electronics, seen as a volatile market, and embrace the company’s businesses involving healthcare, lifestyle, and other technologies. The spun-off chip unit, which will receive a new name in the coming months, will explore additional avenues in mobile, home, automotive, identification, and multimarket semiconductor applications, he added.
In December 2005 Philips said it will create a separate legal structure for its semiconductors business, which would be the world’s 11th largest chipmaker as a standalone entity, and remain third in Europe behind Infineon Technologies AG and STMicroelectronics NV. The unit posted a profit of about 307 million euros ($388 million) in 2005 on sales of about 4.6 billion euros ($5.8 billion), with most of its business in Asia, and less than a quarter in Europe. Less than 10% of Philips’ chips are for internal use.