Royal Philips  today announced that it will start the process to combine its Lumileds (LED components) and Automotive lighting businesses into a stand-alone company within the Philips Group. Philips will explore strategic options to attract capital from third party investors for this business. Philips intends to remain a shareholder and customer of the new company, and will continue the existing innovation collaboration.

“Guided by our long-term strategy, we continue to actively manage our portfolio of businesses,” said Frans van Houten, Chief Executive Officer of Royal Philips. “Philips’ strategy in Lighting is to intensify its focus on connected LED lighting systems and services, LED luminaires, and LED lamps for the professional and consumer markets. Both our Lumileds and Automotive lighting businesses are strong players in the lighting industry and ready to pursue more growth and scale, independently of Philips Lighting. As a world-leading lighting components business, they will have increased flexibility to attract additional investors to accelerate growth.”

“I am confident that the combined business will be able to extend its leading portfolio of digital lighting components and achieve robust growth, serving even more customers in the industry, including of course Philips Lighting,” said Philips Lighting Chief Executive Officer Eric Rondolat. “By combining Philips Automotive lighting and Lumileds, the Automotive lighting customers will continue to benefit from a fully integrated end-to-end R&D and supply chain, enabling the adoption of LED technology in automotive applications.”

Sales of the combined businesses were approximately EUR 1.4 billion in 2013. The chief executive officer of the new company will be Pierre-Yves Lesaicherre, the current chief executive officer of Lumileds. The process to combine Lumileds and Automotive into an integrated business within the Philips Group is expected to be completed in the first half of 2015. Costs associated with setting up the combined business are expected to amount to EUR 30 million in the second half of 2014.

After the merger, the new company can except revenue to reach EUR 2 billion, according to LEDinside understanding. The new company will continue to work in the LED field but will focus on automotive lighitng as it is more profitable. With the future trend in automotive lighting moving towards LED, the merger will integrate sales and technicians from Philips' automotive lighting business and LED lighitng.