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Why is Jinshajiang's acquisition of Philips Lighting Accessories Department blocked?
Royal Philips of the Netherlands recently announced that due to the opposition of the US regulatory authorities, the company has canceled the plan to sell the controlling shareholding of the lighting accessories division to the Chinese consortium GO Scale Capital (the independent fund jointly sponsored by Jinshajiang Venture Capital and Oak Investment). Philips also said that the termination of the agreement with GO Scale Capital does not involve the break-up fee, nor does it affect the process of splitting the lighting accessories department. Splitting is a sole transaction. Philips said that although the company has done a lot of work trying to dispel the concerns of the Committee for Foreign Investment in the United States (CFIUS), CFIUS still vetoed the deal that Philips intends to sell 80% of its business Lumileds. It is unclear what concerns CFIUS has expressed, and the department is responsible for reviewing international transactions related to the United States from a national security perspective. In fact, since March 31 last year, the Chinese and foreign syndicates led by GO Scale Capital of Jinsha River and the Royal Philips of the Netherlands have reached an agreement to acquire 80.1% of Lumileds (LED and Automotive Lighting) under Royal Philips. The team worked actively with the review of regulatory authorities such as the US Foreign Investment Committee (CFIUS). In this acquisition, Jinshajiang GO Scale Capital stands out among many international competitors through fair and open competition with its strong Chinese market strength and industrial base, strong financial strength and deep understanding of the semiconductor industry. But in the end, the deal ultimately failed to lift CFIUS's concerns about national security. Both sides expressed regret. Philips Chief Executive Fransvan Houten: I am disappointed with CFIUS's decision, and now Philips will engage with other potential buyers who have expressed interest in this asset. Rabobank analyst Hans Slob: In the process of reviewing the transaction by the US Foreign Investment Committee, the fundamentals of the Philips lighting business have begun to deteriorate, and it will be difficult for the business to obtain the same purchase price in the future. This is indeed regrettable. Peter Olofsen, an analyst at Kepler Cheuvreux: CFIUS's concerns may be related to US technology transfer to China. Lumileds has a large patent portfolio with multiple production and R&D facilities in the United States. If the sale to new buyers Lumileds, the price may be much lower, because the department's recent profitability is not good. Wu Shenjun, Chairman of Jinshajiang GO Scale Capital: Through this transaction, Jinshajiang GO Scale Capital has accumulated rich experience. The Jinsha River and the Chinese-funded syndicate will spare no effort to continue to look for investment projects with core technologies and broad markets. We firmly believe that through technological innovation and industrial upgrading, we can achieve world-class high-tech companies in China! Event Review In March 2015, Philips announced that 80.1% stake in LED lighting components Lumileds and Automotive Lighting will be sold. Go Scale Capital, led by China's GSR Ventures, has a valuation of about $3.3 billion, while Philips holds the remaining 19.9%. The deal is part of a two-step Philips plan to exit the lighting business, focusing on medical devices such as medical scanners and consumer lifestyles such as coffee makers and electric shavers. On the product. Philips said the company is preparing to list the remaining lighting business IPOs (IPO 0), and plans to divest these two businesses are still on track.