Philips to buy lighting maker Genlyte for $2.7 bln

By Foo Yun Chee

AMSTERDAM (Reuters) - Philips Electronics has agreed to buy U.S. lighting maker Genlyte for $2.7 billion, in a deal to make it the top lighting company in North America and sending its shares to a week high.

Philips, the world's biggest lighting maker, a top-three hospital equipment maker and Europe's biggest consumer electronics producer, said on Monday it will launch a cash offer of $95.50 per Genlyte share within five business days.

Philips is paying a premium of 52 percent to Genlyte's closing price of $62.67 on Friday and Genlyte's board is backing the bid.

Philips' shares were up 1.6 percent to 28.90 euros by 1109 GMT, outperforming a 1.2 percent rise in Amsterdam's blue-chip index.

Genlyte makes a perfect strategic fit for Philips, allowing the Dutch company to push into the energy-saving lightings market in the United States, said Rabo Securities analyst Frits de Vries.

Philips is paying 1.68 times Genlyte's forecast sales, said SNS Securities analyst Victor Bareno. This compares with a 1.5 times sales multiple for Belgian lamp and light fitting maker Partners in Lighting International which Philips bought in February.

"Philips is paying a full price. We believe this price can be justified given Genlyte's higher margins," Rabo's de Vries said.

North American second-ranked lighting fixtures maker Genlyte had an earnings before interest, tax and amortisation (EBITA) margin of 14.9 percent in the 12-month period to September 2007.

Philips expects total synergies of about 60 million euros - split about evenly between sales and costs - from the deal, management told analysts on a conference call. They said the estimates were conservative.

Philips said the acquisition would broaden its client base.

"This deal deepens our contacts to end users ... helping us speed up the market rollout of more energy-efficient lighting and the introduction of new lighting technologies, like solid state lighting," Theo van Deursen, chief executive of Philips Lighting, said in a statement.

Louisville, Kentucky-based Genlyte makes lighting and lighting accessory products, with just under 90 percent of its 2006 sales related to commercial and industrial applications. It had turnover of about $1.6 billion over the 12 months to September 2007.

Philips said it did not expect to be hurt by a downturn in the U.S housing market, telling analysts the U.S. non-residential market, where Genlyte makes most of its sales, was expected to continue growing.

Asked on any share buyback plans after the lower house of the Dutch parliament last week approved a 2008 tax plan that will allow companies to buy back more stock tax free, Philips management told analysts: "We consider this clearly important," without elaborating.

Philips said it expects to close the Genlyte deal in the first quarter of 2008.