Philips Electronics’ share price up, to merge lighting components businesses in a separate 1.4-billion-euro company

Philips Electronics revealed in a statement that it intends to merge some lightning divisions in a separate company estimated to 1.4 billion euros (1.9 billion dollars). The step is undertaken, as the company is seeking to share expenses on research and development with outside investors, thus, following a similar move made by one of Philips major competitors, Siemens AG.

Mr. Frans van Houten, the current Chief Executive Officer of the company, commented on a call with reporters, cited by Bloomberg: “First we will carve out the business and set it standalone, integrate the automotive and LED part, and in parallel we expect to engage with interested parties later this year.”

As reported by the Financial Times, Chief Executive Officer van Houten also added: “The nature of making components is quite different to making applications, such as street lighting, stadium lighting and office lighting. By giving the LED components business access to capital markets as a standalone company we give them the room to play that out and remain successful.”

According to the companys statement, Philips intends to combine its LED-component and automotive-lightning units. The company explained that it is considering several options for these units, including carrying out an initial public offering.

Having invested in Lumileds and automotive lighting during the past few years in order to facilitate growth, Philips is now seeking partners ahead of a next round of investment, van Houten also said.

According to the companys statement, the two units combined sales in 2013 amounted to 1.4 billion euros (1.9 billion dollars), which equals to about 17% of the total lighting sales of Philips. The units are forecast to merge during the first half of 2015.

Philips Electronics added 3.93% to trade at 23.13 euros per share by 13:54 GMT, marking a one-year increase of 10.43%. According to data provided by the Financial Times, the 25 analysts offering 12-month price targets for Philips Electronics have a median target of 26.00, with a high estimate of 32.00 and a low estimate of 23.00. The median estimate represents a 16.83% increase from the last price of 22.26.