Haier

Samsung Elec, LG Elec may be courted for Philips’ domestic appliances unit

South Korean appliances makers including Samsung Electronics Co. and LG Electronics Inc. have emerged as potential candidates to buy out Royal Philips’ domestic appliances arm, but their response remains questionable given their focus on white goods and high-end appliances.

The Dutch conglomerate earlier this year said it was seeking to spin off and divest its domestic appliances business by mid-2021 as part of companywide efforts to focus on the healthcare sector.

The Amsterdam-based company had sold its audio and video business in 2013 to Japan’s Funai Electric for 150 million euros ($171.9 million). In 2016, it spun off its lighting unit and took it public in an initial public offering that valued the company at 3 billion euros.

Philips’ domestic appliances business, whose products include coffee makers, vacuum cleaners and air purifiers, employs 4,700 workers across the world. It has factories in countries including Austria, China and Brazil and R&D centers in India, Hong Kong, Singapore and Italy.

It generated 43 percent of its sales from Europe last year. The Asia-Pacific region was responsible for 15 percent, followed by China at 14 percent and India at 7 percent.

Market insiders believe Korean buyers are on Philips’ radar. Korea is home to not only global appliance giants like Samsung Electronics and LG Electronics but also smaller players with deep-pocketed parents, like SK Magic Co., a kitchen appliance maker under SK Networks Co., and Coway, a water purifier rental firm acquired by gaming giant Netmarble Corp. last December.

Samsung and LG’s portfolios do not include small kitchen appliances, creating little business overlap with Philip’s domestic appliances unit. Europe is also a tougher market for the two conglomerates than North America, where together they control a dominant share of the U.S. market.

Samsung Electronics commanded 20.5 percent of the U.S. home appliance market in 2019, claiming the top spot for the fourth straight year, according to U.S. market research firm TrackLine. LG Electronics came third with a market share of 16 percent, trailing closely behind U.S. Whirlpool at 16.8 percent.

LG Electronics had vowed earlier to overtake Whirlpool as the world’s largest home appliance maker after narrowly losing to its U.S. rival last year. Acquiring Philips’ appliance unit would instantly catapult the company to the top.

Some observers, however, are skeptical of a Korean buyout.

While Samsung Electronics has been actively pursuing M&As to secure new engines of growth, its main areas of focus have been in future innovations including system semiconductors, electronic components and 5G technology.

The same goes for LG Group, which has been investing heavily in artificial intelligence and robots.

The hefty price tag is another turnoff. The Philips deal is likely to cost billions of dollars, which may be considered too much of a risk for Korean companies, according to investment banking sources.-Pulse News

Share this:

Leave a Reply

Stay Updated on TV Veopar Journal.
Receive our Daily Newsletter.