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© marcin kempski dreamstime.com Electronics Production | March 20, 2015

Philips plans to separate into two focused companies

Philips is planning to separate into two independent companies focused on healthtech and lighting solutions respectively in order to capitalise on market changes and new growth opportunities.
“We believe that it is the right time to pursue this decision. Our goal is to become the global leader in HealthTech and shape the future of the industry, which we plan to achieve by building on the strenghts of our Healthcare and Consumer Lifestyle businesses. At the same time, we will establish a separate Lighting Solutions company that will be better able to expand its global leadership position and capture adjacent market opportunities,” the company writes in a letter to it's shareholders.

The decision to separate Philips into two focused, fit for purpose, companies that are better positioned to capture growth and value in HealthTech and Lighting Solutions is the natural next phase of the company’s multi-year transformation journey, according to the letter.

The company has already taken steps in this regard, including the divestments of the Television and Audio, Video, Multimedia & Accessories businesses among others. Philips has also made several strategic acquisitions to strengthen its Lighting Solutions business and expand its position in image-guided therapy. And according to the letter, the company is also making progress with the sale of the combined Automotive Lighting and Lumileds (LED components) businesses.

“By establishing a stand-alone Lighting Solutions company, the Lighting business and management team will be better positioned to capture growth opportunities, be closer to customers, adapt more quickly to evolving customer needs, and enable decisive investments in the future of lighting,” the company states in the letter.

Royal Philips plans to retain its portfolio of businesses addressing the health continuum, from healthy living and prevention, to diagnosis, treatment, recovery and home care.

“A united HealthTech portfolio, enabled by a cloud-based digital health platform and big data analytics capabilities, will be uniquely positioned to capture the key opportunities in population health management, improved solutions for health systems and accountable care organizations, and coordinated care delivery across the health continuum.”

The company has also started the process to carefully transition the current Lighting business into a stand-alone holding company structure, to enable the proposed separation from Royal Philips.

As independent companies with dedicated, focused and lean management structures, both Royal Philips and the Lighting Solutions company will be able to make the appropriate investments to boost growth and drive profitability, ultimately generating significantly more value for our customers, employees and shareholders.

The company's current intention is to fully separate the Lighting business, potentially through a staged process. The Lighting business to be separated is currently expected not to include Automotive Lighting and Lumileds (LED components).

Both companies will continue to leverage the Philips brand.

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