Breaking with tradition, Philips splits off lighting

Tue Sep 23, 2014 7:07am EDT
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By Anthony Deutsch and Thomas Escritt

AMSTERDAM (Reuters) - Philips (PHG.AS: Quote), the Dutch conglomerate that started life making light bulbs 123 years ago, is splitting off its lighting business in a bold step to expand its higher-margin healthcare and consumer divisions.

Putting the lighting business in a separate company is part of a wider strategy that began with Philips' move out of less profitable consumer electronics and into fast-growing healthcare markets, largely in emerging Asian markets.

The decision to split the company in two marks a definitive break from its origins in the southern Dutch town of Eindhoven, where Gerard Philips and his father Frederick founded one of the earliest makers of incandescent light bulbs in 1891.

Philips, which invented the audio cassette and compact disc, grew into a world-leading electronics company by the 1960s but it has always been ruthless about moving out of less profitable businesses, such as audio and video, vinyl records and TVs.

Unveiling the split on Tuesday, Philips Chief Executive Frans Van Houten said it was not clear whether the lighting business would be sold off to investors, or listed on the stock exchange, but the move would bring better returns for investors.

"I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step for Philips," Van Houten said.

"Great companies need to reinvent themselves, we can do that, we can stay relevant, we can grow and we can stay successful. It takes courage but it's a path we've been preparing for carefully."

Van Houten declined to comment on whether either new company could become a takeover target: "Our decision is not driven by fear of what other companies may do."   Continued...

A Philips logo is seen at Philips headquarters, where Philips CEO Frans van Houten gave a presentation of the company's 2013 full-year results, in Amsterdam January 28, 2014. REUTERS/Toussaint Kluiters/United Photos