Philips Preps Semi Biz for Stock Listing

Staff Reporter -- Electronic News, 6/21/2006

Royal Philips Electronics made an IPO of its semiconductor business an official possibility today, saying the company plans to reduce its share of the division to a minority stake over the course of the remainder of the year.

Philips also gave the option of sale of shares to financial investors, while continuing to evaluate industry consolidation opportunities.

In December 2005, Philips first announced that its Semiconductors division would be legally separated as part of its business renewal objectives to see the division’s profitability climb to between 5 percent and 15 percent. The move today also reaffirms Philips place in its more profitable markets—health care, for example—that do not have as short or volatile cycles as its semiconductor business.

Agilent made a similar move last year when it spun off its chip division. The company’s share price had been stuck in neutral because it was tracking as a semiconductor stock rather than the higher-growth test equipment business. Agilent’s stock jumped from about $23 in July 2005 to nearly $40 in May.

Philips serves the mobile and personal, home, automotive and identification, and multi market semiconductor markets.

In a letter e-mailed to employees today Philips’ President and CEO Gerard Kleisterlee, wrote: “In the course of these last few months hundreds of Philips people have been working long hours on issues relating to the disentanglement of semiconductors, while a small top team has worked on the pursuit of the different strategic alternatives. Both projects are well on track and in the process we have been able to define more clearly the next steps we will make and the outcome that will result in, both for Philips as well as semiconductors. This has led us to the decision to speed up the transformation of our semiconductors division into a standalone company that is separate from Philips and will have a majority third parties ownership.” 

Kleisterlee further added: “The future deconsolidation of semiconductors is a further step for Philips in moving away from a focus on high volume electronics and implementing a strategy to build a healthcare, lifestyle and technology company with a strong market focus around the brand promise of sense and simplicity.”

Philips plans to complete the split by the end of Q3 and create an independent semiconductor company with majority third party shareholding before the end of 2006.

Philips did not give a name for the new company and did not note its management.