Philips uncertain over Lumileds sale to China's Go Scale
Dutch electronics giant Philips has cast doubt on the sale of its LED components and automotive lighting unit to a Chinese private equity consortium as it emerged that US regulators were looking into the deal.
Go Scale Capital, which is sponsored by VC firms GSR Ventures and Oak Investment Partners, agreed to buy an 81.1% stake in the Lumileds unit in April, with Philips holding on to the remaining 19.9%. The deal values the business at $3.3 billion.
However, Philips disclosed in its third quarter earnings report that the Committee on Foreign Investment in the United States (CFIUS) - which reviews the national security implications of foreign investments in companies with US operations - has "expressed certain unforeseen concerns." Philips added that it and Go Scale would continue to engage with CFIUS, but it admitted there is uncertainty as to whether or not the deal will close.
Go Scale overcame competition from several global buyout firms to secure the deal. Sonny Wu, co-founder and managing director of GSR and chairman of Go Scale, previously told AVCJ that the consortium's ability to accelerate Lumileds' production capacity in China was a clinching factor.
Lumileds operates in more than 30 countries and reported $2 billion in sales last year and over $200 million in EBITDA. As part of the transaction, more than 600 patents related to LED manufacturing and automotive lighting will be transferred from Philips to Lumileds.
The takeover is to be financed in part from funds managed by Go Scale, which total at least $500 million. Co-investors are putting in the rest. They include Hong Kong real estate and solar investor Kin Ming Cheng's Asia Pacific Resources Development Investment (APRD), government-backed Nanchang Industrial Group, and a number of unnamed LPs from GSR and Oak's funds.
In July, Go Scale raised $1 billion for its cross-border buyout fund, which it hopes will translate into $5 billion worth of dry power once debt financing and co-investment are factored in. Cheng is an investor in the fund and Good Resources - a listed affiliate of APRD - will offer support on all M&A deals, as well as co-investing in certain transactions.
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