PHG Koninklijke Philips NV

By Maarten van Tartwijk 

AMSTERDAM--Royal Philips NV said Monday it is more likely to sell its lighting business via an initial public offering rather than a private sale, sending its shares plummeting.

The Dutch electronics group said it tilts toward an IPO even as it continues to assess proposals in a private sale process.

"With equity markets' sentiment improving compared with the first couple of months of the year, an IPO increasingly appears a more likely outcome, " Philips said. A decision could be announced "shortly", it said.

Shares in Philips fell more than 4% in Amsterdam as investors appeared to react badly to the news of a possible listing. Liberum analyst Daniel Cunliffe said the announcement dashed hopes of a sale even as shareholders have known for more than a year that a listing was possible.

Philips has said an IPO could take place before the end of June, a timing that coincides with the U.K's June 23 referendum on its membership of the European Union. A "no" vote is expected to send ripples across financial markets, creating uncertainty for new stock market listings.

The business has drawn interest from some investment groups, including Blackstone Group LP and Onex Corp., and could be worth up to EUR5 billion ($5.6 billion), The Wall Street Journal reported in March.

Philips Chief Executive Frans van Houten said a disposal remains an option, noting Philips has "not yet concluded on all proposals in the private sale process and continues to assess the attractiveness of this route." The proposals will be judged on their value, contractual conditions as well as potential regulatory hurdles, he added.

In January, Philips terminated a planned $2.8 billion sale of most of its Lumileds unit to a Chinese investor, after the Committee on Foreign Investment in the U.S. blocked the deal on national-security grounds. Lumileds makes components for light-emitting diodes, or LEDs, and will be sold separately from the other lighting activities.

Philips' decision to separate its nearly 125-year-old lighting arm is part of a wider strategic overhaul in which the company seeks to focus on its more profitable and faster growing health-care business, where it competes with Siemens AG and General Electric Co.

The company said tax charges related to the separation of the lighting business contributed to a drop in earnings in the first three months of 2016. Net profit was EUR37 million, a drop of 63% compared with the same period a year earlier.

Adjusted earnings before interest and taxes, the company's preferred measure of its operational performance, rose to 14% to EUR374 million. Sales rose 3% to EUR5.5 billion.

The company maintained its guidance for 2016, saying it expects earnings to improve despite global macroeconomic headwinds.

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

(END) Dow Jones Newswires

April 25, 2016 05:12 ET (09:12 GMT)

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