For more information visit: www.philips.com
Unedited press release follows:
April 18, 2011 — Amsterdam, the Netherlands – Royal Philips Electronics (NYSE:PHG, AEX:PHI) today announced that it has entered into a term sheet to transfer its Television business into a joint venture with TPV Technology (0903.HK) as part of a long-term strategic partnership. The new company will be 70% owned by TPV and 30% by Philips.
“The partnership will help create the scale and focus needed for our Television business to return to profitability and to be successful in the very dynamic television industry,’’ said Philips Chief Executive Officer Frans van Houten. “We are committed to the continuity of Philips Televisions in the market through this venture. The partnership will leverage the strength of the Philips brand, innovation power and trade relationships, with the additional scale and manufacturing strengths of TPV. This decisive step is the right one for the television business, Consumer Lifestyle and Philips as a whole.’’
“We are very excited to have Philips as partner in this TV joint venture,’’ said TPV Chairman and Chief Executive Officer Jason Hsuan. “We have had a solid working relationship with Philips for many years and we are confident that together we can become a leading player in television globally. Today’s announcement marks an important step in realizing our growth ambitions in the television business and I am delighted to work with Philips as a partner on this.’’
The joint venture will be responsible for the design, manufacturing, distribution, marketing and sales of Philips’ Television business worldwide, with the exception of mainland China, India, United States, Canada, Mexico and certain countries in South America. As part of the transaction, Philips will grant the joint venture the right to use the Philips brand, under certain strict quality and customer care standards, for the Television business worldwide, excluding the above-mentioned territories. In exchange, Philips will receive revenue-based royalty payments. The existing brand license agreements in China, India and North America will not move to the joint venture.
“This new joint venture will ensure a stronger future for Philips Television, focused on growth,’’ said Philips Consumer Lifestyle Chief Executive Officer Pieter Nota. “This partnership will enable the newly reshaped Consumer Lifestyle sector to focus on becoming a leading player in health and well-being in the majority of our chosen markets.”
Key Terms and Conditions of the Transaction
• Philips will grant the joint venture the right to use the Philips brand for an initial term of five years with an automatic renewal for another five years, subject to the joint venture meeting certain key performance indicators.
• The joint venture will not pay any royalty in 2012 and will pay royalties of at least EUR 50 million annually from 2013 onwards. For the financial year 2013, the annual royalty payable will be 2.2% of sales. From the financial year 2014 onwards, the annual royalty payable by the joint venture will be 2.2% of sales, which can be increased with a variable component up to a maximum of 3% of sales subject to certain performance criteria.
• Upon completion of the transaction, TPV will purchase 70% of the shares in the joint venture for a deferred purchase price, which will be calculated as a multiple of four times the joint venture’s average EBIT over the financial years 2012 until the year Philips exercises its right to receive the purchase price. Philips may exercise this right at any time after three years from the completion of the transaction. In addition, at any time after the sixth anniversary of the date of completion of the transaction, Philips has an option to sell the remaining 30% shareholding in the joint venture to TPV for a consideration using the same formula.
The signing of definitive agreements is expected to take place in the third quarter, with closing expected to take place before the end of 2011. Between the date of this announcement and signing of the definitive agreements, Philips will engage in the applicable employee consultation procedures and TPV will perform a confirmatory due diligence on the Television business. The closing of the transaction is subject to the relevant shareholder and regulatory approvals.
Philips will report the Profit and Loss on the TV business under Discontinued Operations, and the Net Operating Capital for the business in the Balance Sheet under Assets held for sale. Sales of Philips’ TV business amounted to more than EUR 3 billion in 2010.
About Royal Philips Electronics
Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is a diversified health and well-being company, focused on improving people’s lives through timely innovations. As a world leader in healthcare, lifestyle and lighting, Philips integrates technologies and design into people-centric solutions, based on fundamental customer insights and the brand promise of “sense and simplicity.” Headquartered in the Netherlands, Philips employs about 117,000 employees with sales and services in more than 100 countries worldwide. With sales of EUR 22.3 billion in 2010, the company is a market leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications, as well as lifestyle products for personal well-being and pleasure with strong leadership positions in male shaving and grooming, portable entertainment and oral healthcare.