The deal is worth $950 million (EUR (765 million) to be paid in cash on completion.
Lumileds is headquartered in San Jose, California, USA, and employs 1,760 people at its offices in San Jose, Penang, Malaysia and Best, The Netherlands. Over the last 12 months, from August 04 to July 2005, Lumileds' sales increased approximately 28% to $324 million and the company earned an operating profit of $83 million.
Philips will assume a controlling ownership in Lumileds, holding 96.5% of Lumileds' issued and outstanding share capital, with the remaining 3.5% owned by an employee trust company.
The news comes at the same time as Agilent announced it was divesting its semiconductor group, including a substantial LED business, to a US investor group for $2.66 billion (see Agilent confirms sale of chip business).
"This agreement underscores Philips' commitment to creating value through growth and innovation in emerging technologies," said Theo van Deursen, Chief Executive Officer of Philips Lighting. "Through this acquisition, we will be fully engaged in all stages and areas of the LED business value chain and uniquely positioned to further strengthen our leadership in this new and exciting market."
Philips in-house expertise now extends from the semiconductor LED chips to complete solid-state lighting modules and systems. By aligning Lumileds' LED activities with existing LED lighting modules and luminaires manufactured by Philips Lighting, as well as the semiconductor competencies within Philips Semiconductors, Philips says that it will now be in an "excellent position to strengthen its leadership position" in this new technology.
In a webcast, van Deursen outlined Philips' reasons for entering the joint venture. As well as building Philips' global position as a leader in solid-state lighting technology, the deal provides Philips with access to over 200 LED-related patents, and deepens the company's presence in higher-growth, higher-margin segments of the lighting industry.
"The acquisition will enable Philips to leverage its technology, manufacturing and commercial capabilities," said van Deursen. "The cost synergies are expected to lead to additional revenues." The synergies are expected to occur inthe sales channels, and also at the manufacturing stage between the packages and the modules, where Philips will now be able to influence the development of LEDs for their particular application requirements.
Lumileds is said to be particularly well positioned in applications that are in the early stage of their life cycle, such as LCD backlights, mobile phone flash units, automotive front lighting and general illumination.
Philips is targeting 5% growth for its lighting business, which has sales of around $5 billion. The contribution from Lumileds, with sales of around $320 million, is expected to start to make an impact in the longer term.
Philips expects to be making conventional bulbs for at least 25 years, if not more. Many of the early applications for LEDs in lighting will expolit particular advantages of LEDs rather than replacing conventional technologies.