Philips Shakes Up Lighting Fixture Market With Proposed Genlyte Acquisition

Dec. 6, 2007
As part of its strategy to introduce more green products into the North American market, Royal Philips Electronics NV intends to buy Genlyte Group Inc., Louisville, Ky., for $2.7 billion.

As part of its strategy to introduce more green products into the North American market, Royal Philips Electronics NV intends to buy Genlyte Group Inc., Louisville, Ky., for $2.7 billion.

The proposed acquisition builds on Philips’ earlier purchase of Boston-based Color Kinetics, a leader in designing and marketing innovative LED lighting systems (see EM — June 29, 2007), and provides Philips with a leading position in the North American lighting fixture market. The company said the acquisition would provide access to Genlyte’s extensive presence among lighting customers in North America and speed the adoption of green lighting technologies. Philips is also a major player in the ballast market though its Rosemont, Ill.-based Advance Transformer Co. business unit.

Even before the Genlyte acquisition, lighting fixtures already accounted for a fairly sizable share of Philips Lighting’s global sales. According to a September 2007 presentation to investment analysts by Theo van Deursen, the company’s CEO, lighting fixtures for the commercial and residential markets account for 23 percent of the company’s global sales, while lamps account for 43 percent of sales. Western Europe accounted for 45 percent of the company’s total global sales and North America accounted for 23 percent of sales.

In 2006, Philips Lighting had global lighting sales of approximately $8.1 billion and 47,739 employees. With total 2006 sales of approximately $39.5 billion, its parent company Royal Philips Electronics, is a diverse manufacturer of consumer electronics such as televisions, VCRs, DVD players; medical systems; and personal-care products.

Van Deursen said the acquisition, if completed, was another major step for Philips in executing its strategy to establish a global leadership position as a provider of energy-efficient, solid-state lighting solutions. In a press release, he said, “It follows on our recent acquisitions of Color Kinetics, TIR Systems, Partners in Lighting International, as well as our earlier investment to acquire full ownership of LumiLeds. Besides growing our presence in North America, this deal deepens our contacts to end users, such as wholesalers, contractors, architects and lighting designers, and helps us speed up the market rollout of more energy-efficient lighting and the introduction of new lighting technologies, like solid-state lighting.”

Genlyte designs, manufactures and sells lighting fixtures, controls and related products for a wide variety of applications, including solid-state lighting. Just under 90 percent of Genlyte’s 2006 revenues were related to commercial and industrial applications, with the remainder in high-end residential applications. The company employs approximately 6,700 people. Philips said Genlyte had sales of around $1.7 billion in the 12 months ended Sept. 30. Philips’ plan to extend Genlyte’s activities beyond North America will also contribute to growth, the company said.

Larry K. Powers, chairman, president and chief executive officer of Genlyte Group Inc., added, “Philips is shaping the future of the lighting industry by building up an extensive portfolio of innovative, green lighting. Genlyte has also established a reputation for developing innovative new products utilizing the latest in lamp and ballast technologies. We believe joining with Philips is in the best interest of our shareholders, customers, vendors and employees, and that our combined resources will produce the best possible entity for competing, growing and creating value for our customers.”

Joe Knisley, senior editorial consultant for EC&M magazine, has covered the lighting market for more than 40 years. He said the acquisition is big news because Genlyte, being such a large fixture maker, gives Philips tremendous leverage for winning package deals (lamps/fixtures) on large construction sites. “But it also allows new LED light sources to be integrated into a variety of fixture types as fast as products are available and as fast as new designs can be fashioned,” he said.

Philips said it expects to complete the deal in the first quarter of 2008, pending approval by shareholders and regulators. If approved, the Genlyte acquisition will be the largest of several recent lighting acquisitions for Philips. Most notably, Philips bought Boston-based Color Kinetics, an LED maker, for $688 million in June, and in 2005 it bought Agilent Technology Inc.’s half of their LED joint venture, LumiLeds, for $1 billion.