Philips to acquire Color Kinetics in $791 million deal

June 19, 2007
Philips is to further strengthen its solid-state lighting portfolio with the acquisition of Color Kinetics, the Boston, MA-based innovator of LED lighting systems and technologies.
Philips has announced that it will acquire all of the outstanding shares of Color Kinetics for USD 34 per share, or a total consideration of approximately $791 million (or EUR 592 million), to be paid in cash upon completion. CK's shares were languishing below the $20 mark back in March 2007, before surging to a high of $31.15 last week. The company completed its IPO, with an offer price of $10, back in mid 2004. CK's market capitalization was around $635 million at the time of writing.

Color Kinetics had 2006 sales of approximately $65 million. The company’s sales have grown at a compound annual growth rate of 31% in the period 2001-2006. Operating margins are expected to increase as the company benefits from economies of scale as part of Philips. In addition to its product sales, Color Kinetics has a fast-growing licensing income stream that adds significantly to its value, says Philips.

Upon close of the transaction, the merged entity will operate under the not-too-catchy name of Philips Solid-State Lighting Solutions. Philips' and Color Kinetics' LED fixtures and Color Kinetics' OEM modules will be ultimately co-branded Philips/Color Kinetics.

The merged entity will be headquartered in Burlington, Massachusetts and this site will become Philips' leading global research & development center of innovation for all LED-based fixture/luminaire product lines. The LED luminaire portion of Philips' existing North American operation in New Jersey will be merged with the Burlington operation.

The transaction is subject to the terms and conditions of the merger agreement and to the approval of Color Kinetics’ shareholders, as well as to customary regulatory clearance, and is expected to close in the second half of 2007. Color Kinetics will cease to be publicly listed on the Nasdaq stock exchange

Color Kinetics has a broad technological portfolio covering important patents relating to intelligence and control technology for LED lighting, with 71 patents issued to date. Color Kinetics also has in excess of 15,000 professional installations worldwide and an array of large, industrial customers in professional channels.

For Philips, the deal provides a further boost for its already strong position in the solid-state lighting market. In 2005, Philips secured full ownership of Lumileds, the leading manufacturer of power LEDs, and also recently acquired TIR Systems, which provided Philips with a strong line of fully-integrated solid-state lighting modules used to deliver integrated lighting products to fixture manufacturers.

Philips says that the deal will position it as a leader in SSL luminaires, establishing a strong presence in all aspects of the SSL value chain.

Color Kinetics says that the acquisition by Philips will dramatically fortify the combined company's reach and efforts to make its technology the de facto platform for intelligent LED lighting worldwide.

“This acquisition uniquely positions Philips as a major player in the fast-growing SSL business with technology, expertise and intellectual property in all parts of the value chain of integrated LED-based lighting solutions,” said Theo van Deursen, Chief Executive of Philips’ Lighting division, said. “The technological platform obtained through this acquisition will serve as a springboard for Philips to further create sustainable value through making innovative LED lighting solutions widely available.”

“Today we announce our biggest and most significant step towards putting our core technology and IP at the heart of every future application of intelligent LED lighting,” said Bill Sims, President and CEO, Color Kinetics. “We believe that joining Philips, the global lighting leader, is in the best interest of our shareholders, customers, partners, and employees, and that our combined resources will produce the best possible entity to drive the LED lighting revolution forward.”