Philips to acquire Color Kinetics to strengthen leading position in Led lighting systems, components and technologies

Tuesday, June 19, 2007

 

  • Combination strengthens Philips' LED portfolio, technology base and intellectual property position
  • Color Kinetics' application know-how in combination with Philips' global market presence will accelerate Philips Lighting's growth in Solid State Lighting
  • Builds on Philips' Lumileds and TIR Systems acquisitions in the sector
  • Purchase price corresponds to a Color Kinetics enterprise value of approximately EUR 516 million

  

Amsterdam, The Netherlands and Boston, Massachusetts, USA - Royal Philips Electronics (NYSE:PHG, AEX:PHI) today announced it has reached an agreement with Color Kinetics Incorporated (NASDAQ: CLRK) under which Philips will acquire all of the outstanding shares of Color Kinetics for USD 34 per share, or a total consideration of approximately EUR 592 million to be paid in cash upon completion. The implied enterprise value of Color Kinetics in this offer is EUR 516 million, taking into account approximately EUR 76 million of cash on balance sheet as of March 31, 2007. This transaction is subject to the terms and conditions of the merger agreement and to the approval of Color Kinetics' shareholders, as well as to customary regulatory clearance, and is expected to close in the second half of 2007.

 

Color Kinetics, based in Boston, Massachusetts, USA, is a leader in designing and marketing innovative lighting systems based on Light Emitting Diode (LED) technology. The company has a broad technological portfolio covering important patents relating to intelligence and control technology for LED lighting. Color Kinetics also has in excess of 15,000 professional installations worldwide and an array of large, industrial customers in professional channels.

 

This merger builds on the acquisition of Lumileds in 2005, through which Philips ensured a leading position in high-power LED dyes, and on the recent acquisition of TIR Systems, which provided Philips with a strong line of fully-integrated Solid State Lighting (SSL)-modules used to deliver integrated lighting products to fixture manufacturers. With Color Kinetics, Philips will become a leader in SSL luminaires, establishing a strong presence in all aspects of the SSL value chain. This will further enhance Philips' position to lead the future global shift to more energy-efficient lighting solutions, using LED sources.

 

"This acquisition uniquely positions Philips as a major player in the fast-growing SSL business with technology, expertise and intellectual property in all parts of the value chain of integrated LED-based lighting solutions," Theo van Deursen, Chief Executive of Philips' Lighting division, said. "The technological platform obtained through this acquisition will serve as a springboard for Philips to further create sustainable value through making innovative LED lighting solutions widely available. We admire Color Kinetics' expertise, which they built up in only 10 years of existence, and we will foster the company's creative and entrepreneurial flair in the future while boosting growth by integrating it into the global lighting leader."

 

"We have long said that LEDs are the future of illumination - not a passing novelty - and we've supported that view with unwavering focus on the research and development of new technologies, sales channels, partnerships and industry initiatives to make it a reality. Today we announce our biggest and most significant step towards putting our core technology and IP at the heart of every future application of intelligent LED lighting," said Bill Sims, President and CEO, Color Kinetics. "We believe that joining Philips, the global lighting leader, is in the best interest of our shareholders, customers, partners, and employees, and that our combined resources will produce the best possible entity to drive the LED lighting revolution forward."

 

Color Kinetics had 2006 sales of approximately USD 65 million. The company's sales have grown at a compound annual growth rate of 31% in the period 2001-2006. Operating margins are expected to increase as the company benefits from economies of scale. In addition to its product sales, Color Kinetics has a fast-growing licensing income stream that adds significantly to its value.

 

The market for SSL is at an inflection point for growth as the performance of LEDs measured in lumens per watt is rapidly becoming competitive with traditional light sources. While the market for SSL has up until now been driven by the application of color LEDs, technology in white light has improved significantly, which Philips expects will cause market growth to increase substantially going forward. Independent market sources project that the SSL addressable market will reach USD 20 billion to USD 30 billion in 2025 and is growing currently by approximately 30% per year.

 

Through this merger Philips and Color Kinetics expect to further accelerate growth in this area of the lighting market. Philips and Color Kinetics will drive to stimulate the speed of adoption of LED technologies and applications in the industry. By enabling Color Kinetics' innovative systems to be distributed and sold globally, the benefits of LED will be brought to a far larger market more quickly.

Additional information Color Kinetics

Images - Products

Color Kinetics offers intelligent LED lighting systems for indoor and outdoor applications in a multitude of sizes and shapes, from wall washing lighting fixtures to cove accents to submersible lighting solutions, complete with controller and power supply options. See two of their product examples below.

iColor® Accent Powercore is ideally suited for creating seamless columns of color and color-changing effects. Its precise level of control allows the fixtures to run video, graphics and intricately designed effects in a host of architectural and entertainment settings.

Color Kinetics eW™ Flex SLX is a versatile strand of 50 white LED nodes that apply Chromasic®-based intelligence for individual control. The durable, flexible form factor allows for dynamic points of white light to be installed across nearly any interior or exterior surface – walls, ceilings, floors, and three-dimensional sculptures and set pieces.

Images - Showcases

Color Kinetics' customers, OEM and Licensing partners break boundaries in their forward-looking use of light to transform spaces, build brands, and incite imagination. The three showcase examples below speak for themselves.

Costa Concordia joined the fleet of Italy’s Costa Cruise line in 2006, offering all the comforts of a floating palace with meticulous detail to its stylish design. It is the largest and longest ship among the fleet, and its visually striking interior features multiple applications of Color Kinetics LED lighting technology.

Philadelphia’s historic Boathouse Row received a high-tech lighting makeover. Made possible by Color Kinetics’ intelligent solid-state lighting technology, the new lighting system replaced a 30-year-old incandescent system that required frequent and costly maintenance. By installing the LED-based system, the Fairmount Park Commission expects to save approximately US$57,000 in annual operating costs.

In December 2006 Color Kinetics added another global landmark to its growing list of prominent installations: the London Eye, which is visible from more than a mile away. It was previously lit by fluorescent tubes that proved costly to maintain, and required the manual installation of gels to produce colored light for special events. Color Kinetics was approached to replace this system with an LED-based alternative.

Japan's prestigious Takarazuka University of Art and Design facilitates traditional art and design education while encouraging new opportunities made possible by on-going technological innovation. To best symbolize its focus on the marriage of traditional art and modern innovation, the approximately 200-foot high building makes use of the latest advancements in intelligent LED illumination from Color Kinetics Japan to distinguish its presence against the Osaka city skyline.

For more information, please contact:

Arent Jan Hesselink

Philips Corporate Communications
Tel:  +31 20 59 77415   
Email:  arentjan.hesselink@philips.com


Andre Manning

Philips Corporate Communications
Tel:  +31 20 59 77 199   
Email:  andre.manning@philips.com


Felicia Spagnoli

Color Kinetics Corporate Communications
Tel:  +1 617 701 2292   
Email:  fspagnoli@colorkinetics.com


Justine Alonzo

Color Kinetics Investor Relations
Tel:  +1 617 701 2272   
Email:  jalonzo@colorkinetics.com


About Royal Philips Electronics

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is one of the world's biggest electronics companies and Europe's largest, with sales of EUR 30.3 billion in 2004. With activities in the three interlocking domains of healthcare, lifestyle and technology and 161,100 employees in more than 60 countries, it has market leadership positions in medical diagnostic imaging and patient monitoring, color television sets, electric shavers, lighting and silicon system solutions. News from Philips is located at www.philips.com/newscenter


About Color Kinetics

Celebrating its 10th anniversary this year, Color Kinetics Incorporated (NASDAQ: CLRK) transforms environments through new, dynamic uses of light. Its award-winning lighting systems and technologies apply the benefits of LEDs as a highly efficient, long lasting, environmentally friendly, and inherently digital source of illumination - reinventing light itself as a highly controllable medium. Color Kinetics also enables widespread adoption of LED lighting through OEM and licensing partnerships in diverse markets. The company is headquartered in Boston, MA with offices in the UK and China. More information is available at www.ColorKinetics.com.


Forward-looking statements

This release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. This release also contains certain forward-looking statements with respect to Color Kinetics and the proposed transaction, the expected timetable for completing the transaction, Color Kinetics’ financial and operating results, benefits and synergies of the transaction, future opportunities for the combined company and other statements about Color Kinetics management’s future expectations, beliefs, goals, plans or prospects. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans”, anticipates,” “expects,” estimates” and similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: the Color Kinetics shareholders could fail to approve the transaction; regulatory approvals might not be obtained; and the other factors described in Color Kinetics’ Annual Report on Form 10-K for the year ended December 31, 2006 and its most recent quarterly report filed with the SEC. Color Kinetics disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC

Color Kinetics intends to mail to its stockholders and file with the Securities and Exchange Commission (the "SEC") a Proxy Statement in connection with the proposed transaction, and to file other relevant materials with the SEC. The Proxy Statement and other materials filed with the SEC will contain important information about Color Kinetics, Philips, the Merger and related matters. Investors and security holders are urged to read the Proxy Statement carefully when it is available. Investors and security holders will be able to obtain free copies of the Proxy Statement and other documents filed with the SEC by Color Kinetics and Philips through the web site maintained by the SEC at www.sec.gov. In addition, investors and security holders will be able to obtain free copies of the Proxy Statement from Color Kinetics by contacting Justine Alonzo, Investor Relations Manager, Color Kinetics Incorporated at 617-701-2272 or on Color Kinetics’ web site at www.colorkinetics.com.
Color Kinetics and its directors and executive officers also may be deemed to be participants in the solicitation of proxies from the stockholders of Color Kinetics in connection with the transaction described herein. Information regarding the special interests of these directors and executive officers in the transaction described herein will be included in the Proxy Statement described above. Additional information regarding these directors and executive officers is also included in Color Kinetics’ proxy statement for its 2007 Annual Meeting of Stockholders, which was filed with the SEC on or about April 27, 2007. This document is available free of charge at the SEC's web site at www.sec.gov and from Color Kinetics by contacting Justine Alonzo, Investor Relations Manager, Color Kinetics Incorporated at 617-701-2272 or on Color Kinetics’ web site at www.colorkinetics.com.