Philips Lighting enjoyed a positive first day of trading as a newly spun-off independent company.
Philips Lighting enjoyed a bright start on its first day of trading as a standalone company.
The Dutch electronics group has turned its lighting division into an independent firm so it can focus on making consumer electronics and medical equipment which bring in higher profits and have more growth potential.
Having failed to find a buyer at a suitable price among private equity firm Philips decided to list the business on the Amsterdam stock market.
— Graciana Petersen (@PeGraciana) May 27, 2016
In the initial public offering it sold 25 percent of the shares to enthusiastic investors who pushed the price up by as much as nine percent.
The IPO raised 750 million euros. It plans to sell off the rest of its holdings over the next two years.
Fabulous upside, but also challenges
Philips had argued that the lighting business, which accounted for about a third of group sales but only a quarter of profits, needed independence to invest in developing and marketing programmable lighting systems and related services to corporate customers.
“The challenges facing Lighting are becoming clearer, but not easier,” wrote Jefferies analysts ahead of the listing.
“The dominant profit producer, lamps, is in structural decline, LED lamps are inherently more competitive” while home systems are still too small to matter, the analysts said.
Chief Executive Eric Rondolat said potential investors had been attracted by the “fabulous upside in our industry in general, which is brought by connected light systems and services.”
He conceded that Philips Lighting must improve margins in its professional lighting business if it is to succeed against competitors, which include not only Osram but General Electric and fast-growing newcomer Acuity Brands in the United States.