Philips to split in two in radical 'transformation'

Philips, which 123-year-old Dutch electronics company which invented the company disc, has announced plans to split into two.

The company, which started as a light bulb maker but grew into one of the world's largest electronics companies, wants to create two market-leading companies focused on lighting and health technology.

HealthTech will be created by merging its health care business, which makes hi-tech medical equipment, with the consumer lifestyle division, which makes a range of household products such as coffee makers and shavers. The units had combined sales of €15bn (£12bn) last year.

Frans van Houten, the chief executive of Philips, said: "I do appreciate the magnitude of the decision we are taking, but the time is right to take the next strategic step as we continue on our transformation."

The lighting arm, with sales on €7bn in 2013, is a dominant player in LED lighting products and Mr Van Houten said giving it independence would "better enable it to expand its global leadership position" and expand into new markets.

However, he raised the possibility of a sale or flotation of the lighting arm, saying he would be open to "consider various options for alternative ownership structures".

The separate businesses will continue to use the Philips brand.

Philips said the changes to cost around €50m for the next two years but by then would be generating annual savings of €300m.

Shares in Philips rose 2.6pc to €24.1 in early trading on Tuesday, despite the company warning that it expected second half profits to be below the same period last year due to legal costs and "softness" in its markets.

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