PHG Koninklijke Philips NV

By Maarten van Tartwijk 

AMSTERDAM--Royal Philips NV said Friday it has terminated the planned sale of its lighting components and automotive-lighting unit to a Chinese investor because of regulatory concerns in the U.S.

The Dutch electronics group said the Committee on Foreign Investment in the U.S., or CFIUS, didn't clear the planned disposal of an 80% stake in its Lumileds business despite "extensive efforts" to mitigate its concerns. Chief Executive Frans van Houten said he was "very disappointed" about the committee's decision and that Philips will now engage with other potential buyers who have shown an interest in the business.

Shares in Philips fell 1.6% in early trading in Amsterdam.

Philips said in October that the committee had expressed "certain unforeseen concerns" over the proposed transaction with Go Scale Capital, an investment fund led by Chinese venture-capital firm GSR Ventures. The deal valued the business at $3.3 billion at the time and was an important step for Philips in its plan to exit its lighting activities. The Dutch company is currently preparing to dispose of its remaining lighting business through a listing or sale.

A Philips spokesman said he couldn't elaborate on the concerns raised by CFIUS, citing the confidentiality of the talks with the committee. Philips still aims to sell the Lumileds business separate from the remaining lighting division, he added.

Go Scale Capital couldn't immediately be reached for comment.

CFIUS reviews international transactions on national security grounds and has increased scrutiny of technology deals in the U.S. involving Chinese buyers. Last year, Chinese state-owned chip maker Tsinghua Unigroup Ltd. tried unsuccessfully to buy Micron Technology Inc. for $23 billion, with people familiar with the discussions saying talks fell through in part because of the dim prospect of gaining U.S. regulatory approval.

Kepler Cheuvreux analyst Peter Olofsen said the CFIUS concerns may relate to the potential transfer of technology from the U.S. to China. The Lumileds business has a large patent portfolio and operates several manufacturing and research-and-development facilities in the U.S.

The selling price for Lumileds could be markedly lower with a new buyer as the unit's earnings appear to have come under pressure recently, Mr. Olofsen said.

Write to Maarten van Tartwijk at maarten.vantartwijk@wsj.com

(END) Dow Jones Newswires

January 22, 2016 04:46 ET (09:46 GMT)

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