LONDON — Philips, the Dutch electronics giant, said on Tuesday that it planned to split itself into two companies: one focused on health care and technology, and the other on lighting.
The announcement is the latest step by Philips in an effort to reshape itself. Philips announced plans in June to spin off part of its lighting business — its LED components and automotive lighting divisions — into its own company.
On Tuesday, Philips said that it would combine its health care and consumer lifestyle businesses to form one company, which it has labeled HealthTech.
Philips said it would begin the process of turning the lighting business into a separate company. Philips said it would explore several ownership options for the lighting division, giving the stand-alone company direct access to the capital markets.
“I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step for Philips, as we continue on our transformation,” Frans van Houten, the Philips chief executive, said in a news release. “Both companies 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.”
Dutch Electronics Giant to Split
Frans Van Houten, chief of Philips, says that a holding structure is “no longer necessary” and that splitting into separate businesses will free up cash for new investments.
Publish Date September 23, 2014. Photo by CNBC.The announcement came as Philips was hosting an investor day in London on Tuesday.
As a result of the changes, Philips expects to achieve about 300 million euros, or about $385 million, in cost savings by 2016, but also will incur additional restructuring charges of about €50 million.
Philips, based in Amsterdam, has been looking in recent years to focus its business on growth areas, including by selling some businesses. Prior to Tuesday’s announcement, the company was structured around three business lines: health care, consumer lifestyle and lighting.
The HealthTech business is expected to capitalize on the growing convergence between the health care and consumer sectors, namely consumers using technology to proactively monitor and manage their health.
The health care business has been focused around four areas: imaging systems, patient care information systems, home health care and health care transformation services, a new division started last year to help improve the operational and financial performance of hospitals and health systems.
The consumer lifestyle division has focused on technology products in the home like beard trimmers and home appliances. It has three business areas: health and wellness, personal care and domestic appliances.
In 2013, the health care and consumer lifestyle businesses posted combined sales of about €14.2 billion and employed 54,800 people worldwide. The two units will make up the new health care and technology division.
The new lighting business will include three divisions that range from providing traditional light bulbs to complete lighting systems.
The company expects to provide more information on the changes in 2015.
Philips still plans to go ahead with a separate spinoff of its combined automotive lighting and LED components businesses, which accounted for about 15 percent of its sales in 2013. The spinoff of those business lines is expected in the first half of 2015.
As a whole, all five of the lighting businesses employed about 47,000 people worldwide and had sales of €8.4 billion in 2013.