Philips to buy Genlyte for $2.7 bn
Royal Philips Electronics will buy Genlyte Group for $2.7 billion, the world’s largest lighting maker said on Monday. Philips agreed to pay $95.50 in a management-agreed takeover that values the US company at e1.83 billion.
Genlyte’s shares closed at $62.67 Friday, with Philips’ offer representing a 52% premium. Genlyte makes fixtures for lights used mostly by companies. Amsterdam-based Philips said Genlyte had sales of around $1.7 billion in 12 months ended September 30.
Philips said the acquisition would strengthen its position in energy-efficient lighting, and will allow it to surpass rival General Electric as the largest lighting company in North America. Theo van Deursen, head of Philips’ lighting division, said Genlyte’s distribution channels were more important to Philips than its manufacturing technology. Philips has invested heavily in developing energy-saving bulbs, but has so far been more successful in Europe than in the United States in marketing them.
“It’s very important that (Genlyte) are in contact…with the lighting designers and architects, which helps us a lot in bringing new products to the market,” Van Deursen said on a conference call. Van Deursen said Philips hopes to sell new products, especially LEDs, to Genlyte customers.
LEDs, or light emitting diodes, use computer chips to produce light, rather than the glowing filaments used in traditional incandescent bulbs or the gas used in fluorescent bulbs. Philips expects LEDs to gradually replace both incandescent and fluorescent lights in the coming decade, as they are more energy-efficient, they last longer, and the cost of producing them is expected to fall rapidly.
Philips said it expects to complete the deal in the first quarter of 2008, pending approval by shareholders and regulators. Van Deursen said Philips believed it could boost Genlyte’s sales by around $30 million annually with new product offerings, and cut costs by around the same amount by helping the company with purchasing and distribution. He said Philips did not plan significant cuts to Genlyte’s 6,700 employees, of whom 6,500 are in the United States. The employees will be part of one of Philips’ fastest-growing businesses. Philips shares rose 1.7% to $42.63 in Amsterdam.
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