PHG Koninklijke Philips NV

By Maarten van Tartwijk 

AMSTERDAM--U.S. regulators strike again.

Royal Philips NV said Friday that it terminated the planned $3.3 billion sale of its lighting components and automotive-lighting unit to a Chinese investor, after the powerful Committee on Foreign Investment in the U.S. blocked the deal on national-security grounds.

The move comes just weeks after U.S. Justice Department concerns about competition scuttled another $3.3 billion deal: General Electric Co.'s sale of its appliance business to Sweden's Electrolux AB. After pulling out of that deal in the face of a Justice Department lawsuit, GE agreed to sell the business to China's Haier Group for $5.4 billion.

Philips in March struck a deal to sell a 80% stake in its Lumileds business to GO Scale Capital, an investment fund led by Chinese venture-capital firm GSR Ventures. The proposed transaction, however, raised concerns of the Committee on Foreign Investment in the U.S., known as CFIUS, an interagency group led by the Treasury Department that examines international transactions for their impact on national security. Philips warned in October that the deal could collapse.

The news comes as CFIUS 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 Boise, Idaho-based 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.

Lumileds, like parent Philips, is based in the Netherlands, making the CFIUS action unusual. However, Lumileds has a large U.S. patent portfolio for light-emitting diodes, or LED, and a sizable presence in the U.S. through manufacturing and research-and-development facilities in San Jose, Calif.

GO Scale Capital said it and Philips made persistent attempts to explain the deal, but that their efforts failed to address "unexplained government concerns."

"During the process, GO Scale Capital was very transparent about its bona fide commercial and market-oriented interests," the group said in a statement.

A Philips spokesman said he couldn't elaborate on the concerns raised by CFIUS, citing the confidentiality of the talks. CFIUS couldn't immediately be reached for comment.

Kepler Cheuvreux analyst Peter Olofsen said the CFIUS concerns may relate to the potential transfer of technology from the U.S. to China.

CFIUS makes recommendations to President Barack Obama on transactions that would result in foreign control of U.S. assets, but most of the committee's negative rulings lead to the demise of a deal before the president weighs in.

In a rare action, Mr. Obama in 2012 ordered the sale of U.S. wind-farm assets bought by Ralls Corp., a Chinese-controlled company. The U.S. initially opposed Ralls's desired buyer for the assets but reached a settlement with the company last year allowing the sale to proceed.

Philips said it would engage with other potential buyers that have shown an interest in Lumileds. Selling the unit is 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 and still aims to sell the Lumileds business separately, a spokesman said.

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 09:45 ET (14:45 GMT)

Koninklijke Philips NV (NYSE:PHG)
Historical Stock Chart
From Mar 2024 to Apr 2024

Koninklijke Philips NV (NYSE:PHG)
Historical Stock Chart
From Apr 2023 to Apr 2024